High Court Quashes GST Assessments Relating to Time‑Barred ITC Claims and Directs De‑freezing of Bank Accounts

A Single Judge bench of Justice Krishnan Ramasamy heard writ petitions by a registered dealer challenging assessment orders that reversed input tax credit (ITC) claims and imposed tax, interest and penalty. The petitions contested assessment orders dated 29.02.2024 and 09.03.2024 issued by the GST authorities for the financial year 2018‑19 on the ground that the reversal of ITC was time‑barred and contrary to legislative amendments extending the timeline for claiming ITC.

The High Court allowed the writ petitions insofar as the impugned orders related to ITC claims barred by limitation under Section 16(4) of the CGST Act but within the extended window created by Section 16(5). The court held that subsequent legislative action — the insertion of sub‑section (5) to Section 16, given retrospective effect and enacted by the Finance Act, (No.2) of 2024, and notified by CBIC circulars — rendered the department's limitation objections unsustainable. The court noted that "the impugned orders are no longer sustainable and liable to be quashed." The Court, in its reasoning, observed: “Thus, this Court considering the fact that the issue involved in all these Writ Petitions is only with regard to the availment of ITC, which is barred by limitation in terms of Section 16 (4) of the CGST Act, and in the light of the subsequent developments took place, whereby, Section 16 of the CGST Act was amended and sub‑section (5) was inserted to Section 16, which came into force with retrospective effect from 01.07.2017, the petitioners are entitled to avail ITC in respect of GSTR‑3B filed in respect of FYs 2017‑18, 2018‑19, 2019‑20 and 2020‑21 as the case may be, on or before 30.11.2021, is inclined to quash the impugned orders.” The court directed consequential reliefs including restraint on proceedings based on limitation grounds and de‑freezing of bank accounts frozen pursuant to the impugned orders.

Background

The petitioner, M/s Malligai Agencies, represented by its proprietor, challenged assessment orders which negated its ITC claim and demanded tax, interest and penalty. Counsel for the petitioner submitted that delays in filing GSTR‑3B arose from factors such as financial constraints during the COVID‑19 lockdown, health ailments and other hardships, and were not deliberate. The department issued show cause notices and confirmed recovery in assessment orders. Counsel for both sides informed the court that the issue was squarely covered by a common judgment dated 17.10.2024 in W.P.Nos.25081 of 2023 and batch, where this Court considered legislative developments including the 53rd GST Council recommendation (22.06.2024), subsequent Presidential assent, the Finance Act (No.2) of 2024, Notification No.17 of 2024‑Central Tax (27.09.2024), and CBIC Circular No.237/31/2024‑GST.

The court examined Section 16(4) — which barred ITC after 30th November following the end of the financial year — and the retrospective insertion of Section 16(5), which permitted registered persons to claim ITC for FYs 2017‑18 to 2020‑21 in any return under Section 39 filed up to 30.11.2021. Relying on that statutory amendment and the earlier batch order, the High Court quashed the impugned assessment orders to the extent they sought reversal of ITC that was claimable within the period prescribed by Section 16(5). The court restrained the department from initiating proceedings against petitioners based on limitation, directed the de‑freezing of bank accounts frozen pursuant to the impugned orders, and permitted the petitioner to move a separate refund application which the department would decide on merits. The court clarified that the department retained liberty to proceed in accordance with law where challenges related to discrepancies, excess/wrong/fake ITC claims or fraud were alleged. The writ petitions were allowed on these terms and disposed of with no costs.

Case Details: Case No.: W.P.(MD)Nos.599 & 600 of 2026 & W.M.P(MD)Nos.522, 525, 527 & 528 of 2026 Case Title: M/s. Malligai Agencies Rep. by its Proprietor Kumaresan v. The Assistant Commissioner of GST and Central Excise, Madurai‑I Division & The Superintending of GST and Central Excise, West Range, Madurai‑I Division Appearances: For the Petitioner(s): Mr. Raja. Karthikeyan For the Respondent(s): Mr. R. Gowri Shankar