Facts of the Case

Tvl. Sri Balaji Metal Trading suffered an assessment order dated 15.08.2024 for GSTIN 33ACGFS1555C1ZH (tax period 2019-20), part of which arose from denial of input tax credit under Section 16(4) of the TNGST/CGST Act, 2017. Of the total demand of Rs.7,23,584/-, an amount of Rs.2,98,748/- relating to the Section 16(4) issue had already been paid by the petitioner on 12.09.2022 and 16.09.2022. The petitioner claimed this amount was liable to be refunded in view of the newly inserted Section 16(5), introduced by the Finance (No.2) Act, 2024, with retrospective effect from 01.07.2017, permitting availment of ITC for FY 2017-18 to 2020-21 in any return filed up to 30 November 2021 — the petitioner's returns for February and March 2020 having been filed on 18.12.2020 and 21.12.2020. The petitioner accordingly filed a rectification application under Section 161 of the TNGST Act, which was rejected on 11.03.2025 (impugned in W.P.(MD) No.16344 of 2025) based solely on a Circular, without any discussion.

Issues Involved

  1. Whether the amount confirmed under the assessment order, referable to Section 16(4), was liable to be revisited in light of the retrospective relief under newly inserted Section 16(5).
  2. Whether the rejection of the Section 161 rectification application, made without discussion and solely on the basis of a Circular, was sustainable.
  3. Whether the availability of the appellate remedy under Section 107, now time-barred, precluded interference in writ jurisdiction.

Petitioner's Arguments

  • The confirmed demand under Section 16(4) ought not to survive in view of the retrospective insertion of Section 16(5), since the relevant returns were filed within the extended timeline (up to 30.11.2021).
  • The rejection of the rectification application was a non-speaking order, passed solely relying on a Circular without independent discussion.
  • At this distant point, the appellate remedy under Section 107 against the original assessment order had become redundant given the limitation prescribed.

Respondent's Arguments

  • The petitioner had forfeited the right to relief by not filing a statutory appeal under Section 107 within time, relying on the Supreme Court's decision in Assistant Commissioner (CT), LTU, Kakinada v. Glaxo Smithkline Consumer Health Care Limited.
  • The petitioner had an alternate remedy under Section 107 against the rectification-rejection order as well, and both writ petitions ought to be dismissed.

Court Order / Findings

  • The Court held that the petitioner had made out a good case for interference, notwithstanding that the "redundant appellate remedy" plea would gain some rigour under Section 14 of the Limitation Act, 1963.
  • Crucially, the rectification application had been rejected summarily without any discussion, leaving the Court with no option but to quash the order dated 11.03.2025 in W.P.(MD) No.16344 of 2025 and direct the respondent to pass a fresh order after considering the petitioner's submissions on merits.
  • W.P.(MD) No.16343 of 2025 (challenging the original assessment order) was disposed of, while W.P.(MD) No.16344 of 2025 (challenging the rectification rejection) was allowed.

Important Clarification

  • A rectification application under Section 161 raising a substantive point of retrospective statutory relief (such as Section 16(5) ITC relaxation) cannot be disposed of mechanically by reference to a Circular alone; the proper officer must engage with the specific facts, failing which the order is liable to be quashed for non-application of mind.

Sections Involved

  • Section 16(4) of the CGST/TNGST Act, 2017 — the time limit for availing ITC on an invoice or debit note.
  • Section 16(5) of the CGST/TNGST Act, 2017 (inserted by the Finance (No.2) Act, 2024, retrospective from 01.07.2017) — extends the ITC availment window for FY 2017-18 to 2020-21 up to returns filed by 30.11.2021.
  • Section 161 of the CGST/TNGST Act, 2017 — rectification of errors apparent on the face of the record.
  • Section 107 of the CGST/TNGST Act, 2017 — the statutory appellate remedy and its limitation.

Decision – In Favour of

Assessee (in part) — the rectification-rejection order was quashed and remitted for fresh consideration on merits, while the original assessment challenge stood disposed of on the same terms.

Case Details

Madurai Bench of the Madras High Court; W.P.(MD) Nos.16343 & 16344 of 2025 with connected W.M.P.(MD) petitions; Coram: Justice C. Saravanan; Order dated 18.06.2025.

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