Cases in various court against disallowance of ITC U/s 16(4)

 

 

Section 16(4) of CGST Act, 2017 is with regard to the  Input Tax Credit Conditions. It was amended vide Notification No. 18/2022–Central Tax, Dated: 28.09.2022 by giving effect to amendments proposed by Finance Act, 2022.

Let us know about Section 16(4) as it was there before 18/2022:

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Have a look at section 16(4) as it is there now after 18/2022:

 A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier

Section 16(4) reads as under:

CHAPTER V

INPUT TAX CREDIT

 Section 16 – Eligibility and conditions for taking input tax credit

CGST ACT 2017

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed ⁴ and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

 

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;⁵

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;¹¹

(b) he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.

[(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;]

(c) subject to the provisions of section 41 or section 43A, ⁷]the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:⁸ Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, (43 of 1961),   the input tax credit on the said tax component shall not be allowed.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the  ⁶[thirtieth day of November]                            following the end of financial year to which such invoice or ⁷[****]  debit note pertains or furnishing of the relevant annual return, whichever is earlier.

¹⁰“Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

In the recent weeks, there are several taxpayers who have been issued notices of disallowance of ITC u/s 16(4) of CGST Act.

There are various cases throughout the country which has been filed in various High Courts challenging the disallowance of the ITC as it is not in accordance with the principle of natural justice as well.

Here is a list of some of the cases filed against section 16(4)

1. Shri Kumaran Construction Co WP 2582/2020 Jharkhand HC
2. Rainbow Infrastructure Private Limited & Anr Vs Assistant Commissioner WPA 7159/ 2020
3. Hon. Bombay HC : DN Wind Systems (I) Pvt. Ltd. WPST/27887/2022
4. Surat  Mercantile Association Versus Union of India [2021] 124,  342 Gujarat)
5. Niyati  Constructions Gujarat High Court has granted stay on recover
6. Times Heaven Club P Ltd Gujarat HC SCA 4031/2020
7. Bharti Airtel Ltd Delhi HC WP 6914/2020
8. Trimurty Sales Corporation WP 2570/2020 Jharkhand HC
9. Shreeji Earth Movers vs UOI (WP No 05434 of 2020).
10. Meta Tiles Pvt LTD and anr. WPT No -12338 (Original)2021 – Bombay Highcourt