Kerala High Court Grants Relief to Pazhassi Motors Under New CGST Provision

Section 16(5) of CGST Act Overrides Previous Limitations for Input Tax Credit Claims

In a significant ruling, the Kerala High Court has provided relief to Pazhassi Motors by quashing an earlier assessment order that denied input tax credit for the financial year 2018-19. The court's decision, delivered by Justice Ziyad Rahman A.A., addresses the interplay between Sections 16(4) and 16(5) of the Central Goods and Services Tax (CGST) Act, 2017.

Pazhassi Motors had initially been denied input tax credit due to a failure to file returns within the time limit specified under Section 16(4) of the CGST Act. However, with the subsequent introduction of Section 16(5), which allows for input tax credit claims if returns are submitted by a specified cut-off date, the petitioner sought reconsideration of their case. The petitioner argued that they had complied with the new provision by filing their returns before the cut-off date of November 30, 2021.

The government’s counsel contended that since the petitioner had previously challenged Section 16(4) and faced an adverse judgment, they could not seek relief again without addressing the earlier decision. However, the High Court rejected this argument, emphasizing that Section 16(5) creates a "fresh cause of action" by expressly stating "notwithstanding anything contained in Subsection 4," thereby overriding the limitations of Section 16(4).

Justice Rahman noted that Section 16(5) provides a separate statutory basis for relief, contingent only on the timely filing of returns. As a result, the court directed the quashing of the initial assessment order and instructed the relevant authorities to reconsider the petitioner’s input tax credit claim in light of Section 16(5), ensuring that Pazhassi Motors is granted due relief if all conditions are satisfied.

This judgment underscores the evolving nature of tax legislation and the judiciary's role in interpreting statutory changes to ensure taxpayers' rights are preserved. Legal experts view this decision as a precedent for similar cases, potentially impacting numerous taxpayers who missed initial deadlines but complied with the new provisions.

Bottom Line:

Section 16(5) of the CGST Act, 2017 provides a fresh cause of action for claiming input tax credit, notwithstanding the time limit under Section 16(4).

Statutory provision(s): Section 16(4) of CGST Act, 2017, Section 16(5) of CGST Act, 2017

Pazhassi Motors v. State of Kerala, (Kerala) : Law Finder Doc Id # 2822476