The Goods and Services Tax Appellate Tribunal (GSTAT) has admitted an appeal challenging the denial of Input Tax Credit (ITC) on the ground that suppliers were allegedly treated as return defaulters, after observing that the dispute involves a “pure question of law” and that the appellant had prima facie raised arguable grounds warranting consideration.
The Bench of Tushsar Kanti Satapathy (Judicial Member) and Bijoy Bihari Mahapatra (Technical Member) directed issuance of notice to the respondent. However, it was informed that system-generated intimation was already being sent to both parties. Accordingly, the Bench held that further notice to the respondent was unnecessary.
The central controversy before the Tribunal concerns the denial of ITC allegedly on account of default attributed to the appellant’s suppliers and, more significantly, whether the amended statutory framework concerning Section 16(2)(c) could be applied to an earlier period.
Appearing for the appellant, authorised representative Yogesh Gaba, Chartered Accountant, submitted that the suppliers had been erroneously treated as return defaulters, which consequently resulted in denial of ITC to the appellant. It was contended that such denial was contrary to the provisions of the CGST/JGST Act, 2017 as well as settled legal principles.
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A significant argument raised before the Tribunal concerned the legislative amendment to Section 16(2)(c) and its connection with Section 41 of the GST law.
The appellant pointed out that the words “subject to the provision of section 41” were incorporated into Section 16(2)(c) of the CGST/JGST Act with effect from October 1, 2022 through Notification No. 18/2022-Central Tax dated September 28, 2022.
According to the appellant, prior to the amendment there was no provision mandating reversal of provisionally availed ITC in the event of non-payment of tax by a supplier. The appellant further contended that the earlier statutory regime contained neither a mechanism nor a prescribed timeline for such reversal, and also did not provide a facility for re-availment of the credit following subsequent payment by the supplier.
On this basis, the appellant alleged that the authority below had effectively given retrospective operation to the amended provision while disallowing ITC.
The appellant specifically argued that the forum below had applied the provision inserted into Section 16(2)(c) retrospectively and that the resulting ITC disallowance was therefore “bad in the eye of the law.”
After considering the memorandum of appeal and the documents annexed with it, the GSTAT found sufficient grounds to admit the matter for consideration.
The Tribunal recorded that the appellant had “prima facie, made out arguable grounds warranting consideration” by the Tribunal. More importantly, the Division Bench characterised the dispute as involving a “pure question of law” and consequently admitted the appeal.
The observation assumes significance because the Tribunal has, at this stage, not finally adjudicated whether the ITC denial was legally sustainable or whether the amendment to Section 16(2)(c) was in fact impermissibly applied retrospectively. Rather, it has recognised the legal issue raised by the appellant as arguable and deserving of consideration at the substantive hearing.
The Tribunal also granted liberty to the respondent to file a cross-objection within 45 days. The matter has now been directed to be listed for further hearing on December 18, 2026. The order was dated August 19, 2026.
The Tribunal has not yet returned a final finding on the validity of the ITC claim, the alleged supplier defaults, or the appellant’s contention regarding retrospective application of the amended provision. Its finding at this stage is that the grounds raised are prima facie arguable and that the appeal involves a pure question of law requiring consideration.
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