The West Bengal Authority for Advance Ruling has ruled that Eastern Coalfields Limited is not entitled to reclaim Input Tax Credit (ITC) that it had previously reversed, even after the retrospective insertion of Section 16(5) into the Central Goods and Services Tax (CGST) Act by the Finance (No. 2) Act, 2024. 

The Authority held that the retrospective amendment does not create a fresh right to restore ITC that was already reversed pursuant to an earlier advance ruling. 

The applicant, Eastern Coalfields Limited (ECL), a public sector coal mining company, had entered into a Longwall Mining Project Agreement with a Chinese contractor, China Coal Overseas Development Co. Ltd. (CODCO), for extraction of coal from underground mines. Subsequently, CODCO assigned the service contract to M/s Gayatri Projects Limited, which rendered mining-related services and raised GST invoices for January, February and March 2020. ECL availed ITC on these invoices in accordance with the GST law then prevailing. 

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However, Gayatri Projects filed its GST returns for the relevant period after the prescribed timeline due to disruptions caused by the COVID-19 pandemic. This resulted in a dispute over the admissibility of ITC under Rule 36(4) of the CGST Rules. In August 2021, the West Bengal AAR ruled that ECL was not entitled to retain the credit, compelling the company to reverse the ITC already claimed. The ruling was later reaffirmed after the matter was remanded by the Calcutta High Court for fresh consideration. 

Following the enactment of the Finance (No. 2) Act, 2024, Parliament inserted Section 16(5) into the CGST Act with retrospective effect from July 1, 2017. The provision extended the deadline for claiming ITC relating to financial years 2017-18 through 2020-21 in returns filed up to November 30, 2021.

Relying on this retrospective amendment, ECL approached the Authority once again, contending that the earlier denial of ITC was based on the unamended law and that the legislative change effectively restored its entitlement to the credit. The company argued that the amendment was beneficial in nature and intended to remove hardships faced by taxpayers. 

The Authority observed that Section 16(5) merely overrides the limitation contained in Section 16(4) regarding the time limit for availing ITC for specified financial years. It does not override or dilute the other mandatory conditions prescribed under Section 16(2), which continue to govern eligibility for ITC.

According to the Authority, ECL had already claimed the credit within the applicable statutory time limit. The earlier denial was not solely because of the limitation under Section 16(4), but because the credit had been availed in violation of Rule 36(4), as the supplier had not uploaded the relevant invoice details within the prescribed period. Therefore, the retrospective amendment extending the time limit did not alter the basis on which the ITC had originally been disallowed. 

The Authority further noted that its previous findings regarding non-compliance with Rule 36(4) and Section 16(2) remained valid even after the statutory amendment.

The Bench also examined whether ECL could simply reclaim the ITC that had already been reversed.

It referred to Section 150 of the Finance (No. 2) Act, 2024, which specifically provides that no refund shall be granted of tax paid or ITC reversed, even if such payment or reversal would not have been required had Section 16(5) existed at the relevant time.

Rejecting ECL’s contention that “refund” should be interpreted only within the meaning of Section 54 of the CGST Act, the Authority held that re-availing previously reversed ITC is, in substance, equivalent to seeking a refund. Accepting the company’s interpretation, it observed, would defeat the legislative intent and produce anomalous results between taxpayers who paid demands in cash and those who reversed ITC. 

The West Bengal Authority for Advance Ruling answered the question in the negative, holding that Eastern Coalfields Limited cannot reclaim the Input Tax Credit reversed pursuant to the Authority’s earlier ruling, notwithstanding the retrospective insertion of Section 16(5) of the CGST Act. The Authority concluded that the amendment does not create any fresh entitlement to restore ITC already reversed, and such re-availment would effectively amount to a refund prohibited under Section 150 of the Finance (No. 2) Act, 2024. 

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