The Madurai Bench of the Madras High Court has held that a taxpayer challenging the denial of Input Tax Credit (ITC) on the ground of delayed availment must first exhaust the statutory appellate remedy under the Goods and Services Tax (GST) law. 

However, while declining to entertain the writ petition, the bench of  Justice M. Dhandapani directed the appellate authority to specifically examine the impact of the retrospective insertion of Section 16(5) of the CGST Act, 2017, which grants relief in certain cases involving belated ITC claims for the financial year 2019–20. 

The petitioner/assessee challenged the Order whereby the GST authorities had denied the petitioner’s ITC claim for the assessment year 2019–20 on the ground that the credit had been availed beyond the time limit prescribed under Section 16(4) of the CGST/TNGST Act. 

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The petitioner challenged the assessment order contending that the sole basis for the denial of ITC was the alleged belated availment of credit under Section 16(4) of the CGST Act. According to the petitioner, the legal position had undergone a significant change following the enactment of the Finance (No. 2) Act, 2024, which retrospectively inserted Section 16(5) into the CGST Act.

The petitioner argued that under the newly inserted provision, read with the corresponding notification, taxpayers who had filed returns within the extended statutory period for the financial year 2019–20 became entitled to claim ITC despite the earlier limitation under Section 16(4). Consequently, it was submitted that the very foundation of the assessment order, including the demand of tax, interest and penalty, had ceased to exist. The petitioner therefore sought quashing of the impugned order and a fresh adjudication after considering the amended legal position. 

Appearing for the tax department, the Senior Standing Counsel opposed the writ petition on the ground of maintainability. It was argued that the petitioner had an effective and efficacious statutory remedy under Section 107(1) of the CGST Act by way of an appeal against the assessment order.

The department contended that when the GST statute provides a complete appellate mechanism, the High Court should ordinarily refrain from exercising its extraordinary jurisdiction under Article 226 of the Constitution and should instead direct the petitioner to pursue the statutory remedy. 

After considering the rival submissions, the High Court agreed that the petitioner possessed an effective alternative remedy under Section 107(1) of the CGST Act. Without expressing any opinion on the merits of the controversy or on the applicability of Section 16(5), the Court declined to interfere with the assessment order in exercise of its writ jurisdiction. 

The Court observed that issues arising from the retrospective amendment could appropriately be examined by the statutory appellate authority while deciding the appeal on merits.

Recognising the circumstances of the case, the High Court granted liberty to the petitioner to file a statutory appeal within four weeks from receipt of the order.

The Court directed that if such an appeal is filed within the prescribed four-week period, the appellate authority shall entertain it without insisting upon limitation. The authority was further directed to consider all the contentions raised by the petitioner, including the effect of the retrospective insertion of Section 16(5) of the CGST Act, provide an opportunity of personal hearing, and thereafter decide the appeal on its own merits and in accordance with law. 

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