The Kerala High Court in the case of M. Trade Links v, Union of India vide WP(C) NOS. 31559 OF 2019 AND OTHS. dated 04.06.2024, the procedural amendment vide the Finance Act 2022, extending the return filing date to 30th November is given retrospective effect from 01.07.2017.The amendment extended this due date to 30th November, addressing initial compliance difficulties. This amendment is procedural and aims to ease initial implementation issues. Consequently, for the period from 01.07.2017 to 30.11.2022, if a dealer filed the return after 30th September but before 30th November, the ITC claim should be processed if otherwise entitled.

ITC claims should not be rejected if the return for September was filed by 30th November, not necessarily by the earlier date of 20th October. Petitioners who missed availing the benefits within the prescribed time limit can approach the GST authority within thirty days from the date of the judgment to avail themselves of these benefits. The judgment acknowledges the initial difficulties in the GST implementation, provides procedural relief, and ensures ITC claims are processed fairly within the extended timelines. The procedural amendments are given retrospective effect to address these challenges comprehensively.

However, Challenges to the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST Act were dismissed, reinforcing the framework governing ITC claims.

Facts of the Case:- The Petitioner submitted a detailed challenge to the denial of Input Tax Credit. Their main arguments can be categorized into legal, procedural, and constitutional points, highlighting various grounds on which they believe the denial of ITC is unjust and unconstitutional.

• The petitioners have been denied ITC despite having valid tax invoices, proof of payment, and receipt of goods
• In some cases, suppliers have not remitted the tax, which is not reflected in their returns due to technical reasons or defaults.
• They argue that the non-availability of tax payment in GSTR-2A should not impact their ITC entitlement if they have valid documentation (Rule 36).

Submissions by the Petitioner:-

• GSTR-2A is a read-only, auto-populated document based on the suppliers' GSTR-1. Their self-assessed returns should be the basis for ITC, regardless of GSTR-2A's non-operability.
• CBIC's press release (18.10.2018), which clarifies that GSTR-2A is for facilitation and does not impact ITC entitlement.
• Section 155 places the burden of proving ITC eligibility on the claimant. Thus, having valid invoices, payment proofs, and receipt of goods should be sufficient to discharge this burden.
• The law should not compel actions that are impossible, such as ensuring suppliers remit tax.
• The responsibility to collect and recover taxes lies with the state, not the recipient dealers.
• Section 16 (4) is criticized for being arbitrary and procedural provisions should not defeat substantive rights. Amendments to deadlines and procedural lapses (like delayed GSTR-3B filings) should not deny substantive ITC claims.

However, the petitioners seek relief through either declaring Section 16 (2) (c) unconstitutional or reading it down to ensure ITC is not denied based on procedural lapses or suppliers' defaults. They argue for a balanced approach where bona fide recipients are not penalized for issues beyond their control, emphasizing the importance of protecting their constitutional rights and maintaining the integrity and objectives of the GST system.

Submissions by the department:-  The respondents argue that a taxing statute can only be deemed unconstitutional on grounds of manifest arbitrariness, unreasonableness, legislative incompetence, or violation of constitutional rights. The GST provisions, particularly Sections 16 (2) (c) and 16 (4), are crafted to ensure tax compliance and integrity, which is neither arbitrary nor unreasonable. These provisions aim to maintain the balance and proper functioning of the GST mechanism.

Further, Sections 16 (2) (c) and 16 (4) impose necessary conditions and time limits for claiming ITC. These provisions ensure that ITC is claimed only when the tax is actually paid to the government, preventing fraudulent claims and ensuring that the tax chain remains intact. The imposition of a time limit for claiming ITC (Section 16 (4)) ensures timely tax compliance and aids in accurate budgetary estimations for the government.

Observations of Court:- The Court observed as under:-

A. Retrospective effect of Procedural Amendments:

• The Court stated that the amendment vide the the Finance Act 2022, extending the due date for furnishing returns under Section 39 from 30th September to 0th November addressing initial compliance difficulties, is procedural and aims to ease initial implementation issues
• Consequently, for the period from 01.07.2017 to 30.11.2022, if a dealer filed the return after 30th September but before 30th November, the ITC claim should be processed if otherwise entitled.
• It is held that such procedural amendment extending the return filing date to 30th November is given retrospective effect from 01.07.2017. ITC claims should not be rejected if the return for September was filed by 30th November, not necessarily by the earlier date of 20th October.
• Taxpayers who filed their returns for September by the extended deadline of 30th November should have their claims processed and not rejected based on the old deadline
• Also, it is held that Petitioners who missed availing the benefits within the prescribed time limit can approach the GST authority within thirty days from the date of the judgment to avail themselves of these benefits.
• Tax authorities need to consider ITC claims based on the amended deadlines and provide retrospective effect to procedural changes. 

B. Constitutional Validity of Sections 16(2)(c) and 16(4):

• A taxing statute can be declared unconstitutional if it infringes upon the fundamental rights guaranteed under Part III of the Constitution of India, including Article 14.
• the nature of the claim to Input Tax Credit (ITC) under the GST Act, it's established that ITC is a benefit or concession extended to dealers within the statutory scheme. While it may be considered an entitlement, it's subject to conditions and restrictions outlined in the law. The Court upheld the view of respondent department that ITC is not an absolute right but a concession subject to statutory provisions.
• The specific sections mentioned (Section 16(2)(c) and Section 16(4) of the CGST/SGST Act) were scrutinized for their constitutionality. It was determined that these provisions, which impose conditions and time limits on claiming ITC, are crucial for balancing tax collection and revenue allocation. The courts have upheld their validity, emphasizing the importance of adhering to statutory conditions for granting ITC.

The Court highlights that procedural amendments in the GST regime, specifically the extension of filing deadlines, should be applied retrospectively to ensure fairness. Bona fide ITC claims made during the initial years of GST implementation are safeguarded by specific circulars, thereby addressing issues arising from the non-availability of GSTR-2A forms. Challenges to the constitutional validity of related sections were dismissed, reinforcing the framework governing ITC claims.

To read the complete judgment 2024 Taxo.online 1108