Section 16(5) protects FY 2018–19 ITC claims filed by 30 November 2021 from limitation-based reversal.

The petitioner, a registered GST dealer, challenged an order dated 30 May 2023 under Section 73 of the TNGST/CGST Act for FY 2018–19, which reversed or denied input tax credit (ITC) and directed payment of tax, penalty and interest.

The petitioner also challenged the consequential summary order in Form GST DRC-07.

At the hearing, both parties submitted that the limitation issue was covered by the Madras High Court’s common order dated 17 October 2024 in W.P. Nos. 25081 of 2023 and batch; the respondent’s counsel fairly accepted that position.

1. Whether the impugned order was liable to be quashed insofar as it denied ITC on limitation grounds under Section 16(4), where the claim fell within the period allowed by Section 16(5) of the CGST Act.

2. Whether the Department could retain authority to pursue any independent dispute concerning the correctness or eligibility of the ITC claim.

Section 16(4) of the CGST Act prescribes the time limit for taking ITC.

Section 16(5), inserted retrospectively with effect from 1 July 2017, provides that for invoices or debit notes pertaining to FYs 2017–18 to 2020–21, ITC may be taken in a return under Section 39 filed up to 30 November 2021.

The Court followed its common order dated 17 October 2024 in W.P. Nos. 25081 of 2023 and batch, which held that orders founded on Section 16(4) limitation could not stand to the extent the relevant claims were within Section 16(5)’s extended period.

The Court accepted the parties’ submission that the present limitation issue was governed by the 2024 batch decision.

Applying Section 16(5) as interpreted in that decision, it quashed the 30 May 2023 order only insofar as it denied ITC as time-barred under Section 16(4), where the claim was within the period prescribed by Section 16(5).

The Court preserved the Department’s liberty to proceed in accordance with law on any separate issue, including discrepancies, wrong or excess ITC, or fake ITC claims.

The impugned order was quashed to the limited extent that it rejected ITC on limitation grounds despite Section 16(5); the Department was restrained from taking action under that order based on limitation and was directed to take steps to defreeze any bank account frozen pursuant to it.

The Court also addressed recovery during the pendency of the petition and permitted amounts collected or deposited in the petitioner’s cash or credit ledgers to be refunded or used towards future tax, while preserving the Department’s liberty to pursue other ITC-related issues in accordance with law.

No costs were awarded, and the connected miscellaneous petition was closed.