Madras HC Quashes GST ITC Reversal For Furniture Dealer To Extent Claims Fall Within Section 16(5) Window

The petitioner, a registered GST dealer, challenged two assessment orders dated 30 June 2023 reversing or denying input tax credit (ITC) on limitation grounds and directing payment of tax, penalty and interest.

In W.P. No. 44618 of 2026, it also challenged a consequential property attachment notice dated 4 September 2025.

The parties submitted that the issue was covered by the Madras High Court’s common order dated 17 October 2024 in W.P. No. 25081 of 2023 and connected cases, and the respondent accepted that position.

Section 16(4) of the CGST Act generally limits the time for claiming ITC.

Section 16(5), inserted with retrospective effect from 1 July 2017, provides that, notwithstanding Section 16(4), ITC relating to financial years 2017–18 to 2020–21 may be taken in a return under Section 39 filed by 30 November 2021.

The Court applied its order in W.P. No. 25081 of 2023 and connected cases, which held that assessment orders based on Section 16(4) limitation could not stand to the extent the claims were permitted by Section 16(5), without precluding proceedings on distinct grounds such as wrongful, excessive or fake ITC claims.

The Court treated the dispute as governed by its earlier decision and noted that both parties accepted that it applied.

Applying Section 16(5), it quashed the impugned orders only to the extent they denied ITC on limitation grounds where the claims fell within that provision.

It preserved the Department’s ability to proceed in accordance with law on any separate grounds concerning the ITC claims.

The assessment orders dated 30 June 2023 were quashed insofar as they denied ITC on limitation grounds covered by Section 16(5), and the Department was restrained from proceeding on that limitation basis.

The Department was directed to take steps to defreeze any bank account frozen pursuant to the impugned orders; amounts collected or deposited in the petitioner’s cash or credit ledgers may be refunded or used towards future tax, as applicable.

The Department retained liberty to proceed on other ITC-related issues in accordance with law. No costs were ordered.