Facts of the Case:

In this case, the petitioner challenged Notification No. 22/2024-Central Tax dated 08.10.2024, issued under Section 148 of the CGST Act, 2017, prescribing a special procedure for giving effect to the retrospective insertion of Section 16(5). Section 16(5), introduced with effect from 01.07.2017, provides a beneficial relaxation whereby ITC in respect of invoices/debit notes pertaining to FY 2017-18 to 2020-21 could be availed in a return filed up to 30.11.2021, notwithstanding the limitation under Section 16(4).

The impugned Notification permitted a registered person whose ITC had been denied under Section 16(4), pursuant to an order under Sections 73, 74, 107 or 108, to seek rectification by filing an application within six months from the date of the Notification. The petitioner contended that Section 16(5), being a substantive and beneficial provision introduced retrospectively, did not itself prescribe any six-month period for filing an application to obtain its benefit. According to the petitioner, the Notification could prescribe a procedure under Section 148 but could not effectively curtail the substantive benefit conferred by Section 16(5).

Issue:

Whether the Government, while prescribing a special procedure under Section 148 of the CGST Act to implement Section 16(5), could prescribe a six-month limitation period without providing any mechanism for extension where the taxpayer was prevented by sufficient cause from filing the application within that period, thereby potentially curtailing the benefit conferred by Section 16(5)?

Held That:

The Court expressed the view that although the Government is empowered under Section 148 to prescribe a special procedure for giving effect to statutory provisions, such procedure must also incorporate the necessary safeguards contemplated by the statutory scheme. Section 148 authorises the Government, on the recommendations of the GST Council, to prescribe special procedures for specified classes of registered persons, including matters relating to registration, returns, payment of tax and administration. Therefore, the Court accepted that the issuance of a notification prescribing a procedure for implementing Section 16(5) was within the general ambit of Section 148.

However, the Court identified a significant difficulty with the absolute six-month time limit prescribed by Notification No. 22/2024-Central Tax. It noted that Section 16(5), introduced retrospectively with effect from 01.07.2017, conferred a substantive statutory benefit upon eligible taxpayers by permitting ITC pertaining to FY 2017-18 to 2020-21, subject to the statutory condition that the relevant return under Section 39 had been filed by 30.11.2021. Significantly, Section 16(5) itself did not prescribe a further period within which a taxpayer had to apply for rectification or otherwise seek implementation of the benefit.

The Court therefore observed that the Notification, while intended merely to prescribe a procedure for implementing Section 16(5), had the practical effect of restricting the time available to taxpayers to claim a benefit which had already been conferred by the substantive provision. According to the Court, the issue was not whether a procedural framework could be prescribed under Section 148, but whether such procedural framework could operate so as to defeat or substantially curtail the benefit granted by Section 16(5).

A particularly important concern identified by the Court was the absence of any safeguard for cases where a taxpayer, for sufficient cause, was unable to submit the application within the stipulated six months. The Court specifically questioned whether, before recommending the procedure, the GST Council had considered such exceptional situations and whether the Government had considered those recommendations while issuing the Notification. The respondents were unable to provide clarity on this aspect, and the contents of the Notification themselves did not indicate that such a safeguard had been considered.

The Court consequently observed that, although the Government possessed the power to prescribe the procedure, appropriate safeguards ought to have been incorporated while exercising that power. In the Court’s view, such safeguard would necessarily include a mechanism enabling a taxpayer to obtain further time where sufficient cause prevented filing within the prescribed six-month period. Such a mechanism would ensure that the procedural requirement did not frustrate the substantive object behind the retrospective insertion of Section 16(5).

The Court, therefore, prima facie concluded that the Notification could not withstand scrutiny under Section 148 in the absence of such a safeguard, as the Government had failed to adequately protect the interests of taxpayers while prescribing the procedure. The Court specifically observed that the right accrued to eligible taxpayers under Section 16(5) could not be curtailed merely by prescribing a procedural time limit which was not contained in the substantive provision itself.

However, the Court did not finally dispose of the challenge to the Notification at this stage. Considering that the matter involved interpretation of the power exercised under Section 148 and raised questions concerning the recommendations of the GST Council and the Government’s consideration thereof, the Court considered it appropriate to hear the Additional Solicitor General of India and the Advocate General of the State. The petitioner was accordingly directed to implead the Union of India, State of Maharashtra and GST Council as respondents.

Notice was issued to the newly added respondents, and the matter was listed for further consideration on 11.09.2026. Thus, the observations regarding invalidity of the six-month restriction are presently prima facie observations, and the final validity of Notification No. 22/2024-Central Tax remains subject to further adjudication.

Case Name: M/s Mehadia & Sons (C&F Division), a registered partnership firm through its authorized signatory, Nagpur Versus Principal Chief Commissioner, CGST & Central Excise, Nagpur Zone and ors. dated 28.08.2026

Citation: 2026 Taxo.online 2613