Facts of the Case

This batch of fourteen writ petitions, led by Liz Enterprises, involved three broad categories of Input Tax Credit disputes arising in the early years of GST: cases where the supplier had actually remitted tax but it was not reflected in the supplier's GSTR due to technical glitches; cases where the recipient held valid tax invoices and proof of payment (including the GST component) but the supplier had not remitted the tax; and cases involving invoices with no clear proof of payment of consideration and tax. The petitions also raised the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST/KGST Act, and challenges to detention and confiscation proceedings, refund rejections and disallowance of ITC across various tax periods from 2017-18 onward.

Issues Involved

  1. Whether Section 16(2)(c) and Section 16(4) of the CGST/KGST Act were constitutionally valid.
  2. Whether the initial unavailability of Form GSTR-2A during FY 2017-18 and 2018-19, and consequent difficulties reconciling ITC, entitled affected dealers to relief under CBIC's Circular No.183/15/2022-GST and Circular No.193/05/2023-GST.
  3. Whether the statutory due date for filing the September return under Section 39 ought to be treated as 30 November for each financial year with retrospective effect from 01.07.2017, for the limited purpose of processing ITC claims.

Petitioner's Arguments

  • The petitioners across the three categories argued that, given the well-documented initial glitches in the GST regime, bona fide ITC claims — whether the recipient's supplier had actually paid tax without it reflecting correctly, or the recipient held valid tax invoices and payment proof — ought not to be defeated on rigid technical grounds.
  • Reliance was placed on CBIC's own remedial Circulars No.183/15/2022-GST and No.193/05/2023-GST, and on the retrospective procedural nature of the amendment extending the September-return due date to 30 November each year.

Respondent's Arguments

  • The GST authorities, represented across Union of India, GSTN, CBIC and State respondents, defended the disallowances and refund rejections on the footing that the statutory conditions under Section 16 for availing ITC, including matching of supplier remittance, had not been satisfied within the prescribed period.

Court Order / Findings

  • The Court adopted the reasoning, observations and conclusions of its earlier judgment dated 04.06.2024 in W.P.(C) No.31559/2019 and connected matters, which had comprehensively dealt with identical questions of fact and law.
  • The Court held that the challenge to the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST/KGST Act was rejected, but granted substantive relief on the procedural front: petitioners entitled to the benefit of Circular No.183/15/2022-GST and Circular No.193/05/2023-GST, covering the period from GST's introduction until Section 16(2)(aa) was inserted with effect from 01.01.2022, were given liberty to make their claims within one month before the appropriate GST authority, which would examine and grant applicable relief.
  • Further, the Court directed that the time limit for furnishing the September return under Section 39 be treated as 30 November of each financial year with effect from 01.07.2017, holding the 2022 amendment extending this date to be procedural and hence retrospective, so that ITC claims made before 30 November of the succeeding year, based on a September return filed by that date, should be processed rather than rejected merely because the return was filed after the earlier 20 October cut-off.
  • Adopting these conclusions, all fourteen connected writ petitions in the present batch, led by Liz Enterprises, stood disposed of accordingly, with all pending interlocutory applications closed.

Important Clarification

  • The 2022 amendment extending the due date for furnishing the September GSTR-3B return each year is procedural in character and must be given retrospective effect from 01.07.2017; consequently, ITC claims made through a September return filed on or before 30 November of the succeeding year cannot be rejected merely because the return missed the earlier 20 October due date.
  • Dealers who could not avail the benefit of CBIC Circulars No.183/15/2022-GST and No.193/05/2023-GST (covering bona fide ITC-mismatch scenarios from GST's rollout until Section 16(2)(aa) was introduced) within the originally prescribed window may still approach the GST authority for relief under those Circulars if permitted by a court within a fresh, specified timeline; and the constitutional validity of Sections 16(2)(c) and 16(4) of the CGST/KGST Act stands upheld.

Sections Involved

  • Section 16(2)(c) of the CGST/KGST Act, 2017 — condition requiring actual payment of tax to the Government for ITC eligibility, held constitutionally valid.
  • Section 16(4) of the CGST/KGST Act, 2017 — time limit for availing ITC, also upheld, but read alongside the extended 30 November due date for September returns.
  • Section 39 of the CGST/KGST Act, 2017 — furnishing of returns, whose September due-date extension was held retrospective.

Decision – In Favour of

Disposed of partly in favour of the Assessees, upholding the constitutional validity of Sections 16(2)(c) and 16(4) but granting procedural relief through the retrospective 30 November return-filing benefit and liberty to claim relief under the CBIC Circulars.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.28287 of 2019 and connected matters (WP(C) Nos.10022/2021, 17111/2021, 22869/2022, 33952/2022, 34265/2022, 34761/2022, 35347/2022, 35606/2022, 35797/2022, 35980/2022, 37023/2022, 37908/2022, 41861/2022)
Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
Date of Judgment: 28th June, 2024

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