The provision of Section 16(4) of the CGST Act which restricts the claim of ITC only on the ground that a return is filed after the date prescribed is arbitrary

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In ANAND STEEL (TRADE NAME )(PRO. SHRI JAGDISH KUMAR MANSUKHANI) RATLAM MADHYA PRADESH Versus UNION OF INDIA AND OTHERS WRIT PETITION No. 2164 of 2024 the Madhya Pradesh High Court has held that the provision of Section 16(4) of the CGST Act which restricts the claim of ITC only on the ground that a return is filed after the date prescribed is arbitrary as well as the taxpayer who is claiming the ITC has already made the payment of tax to the supplier from whom the goods and services has been received. The payments include both cost of service or
goods and the amount of Tax, thus the taxpayer cannot be deprived from his right to claim ITC.

It was also held that the interpretation of Section 16 of CGST Act which covers eligibility and conditions for taking ITC that a right on ITC is created when a tax payer fulfills all the conditions specified in Section 16(2) of the CGST Act which has been drafted as a non-obstante provision and to use the words of the Hon’ble Apex Court, this right can be earned by the beneficiary only as per scheme of that statute. However, imposition of a  time limit through Section 16(4) would supersede or override this scheme of the statute operation of Section 16(4) makes the non-obstante section 16(2) meaningless; Section 16(2) has overriding effect on Section 16(4) and Section 16(2) has been drafted in a manner which shows clear legislative intent that it is not subject to Section 16(4).

The Madhya Pradesh High Court further observed that the GST laws do not have any provision and scope for filing a revised return, taxpayers are extremely cautious to file the monthly return for March and may like to wait for a longer time to reconcile the entries and ensure that there is no unnecessary mismatch between the GST returns and the financial records. This exercise is generally taken when the financial audit goes on . They even pay huge late fees to delay the filing of such return and such late fees are paid on subsequent returns also as GST laws does not permit filing of monthly return in FORM 3B if return for earlier month has not been filed. Allowing a taxpayer to file returns with payment of late fees and then disallow him the ITC, because the return was filed belatedly, is punishing him twice for a single default so committed.

Moreover, with the payment of late fee u/S 47 as well as payment of interest u/S 50, the treasury has been suitably compensated for the postponement of the tax. Payment of late fees and interest are already there as deterrent for the taxpayers forcing them to be disciplined. Under such circumstances, saddling with double payment of tax by way of Section 16(4) is arbitrary and capricious, the Court held.