Facts of the Case:

In this case, the applicant (ECL) a Public Sector Undertaking owned coal mining company, had entered into a Longwall Mining Project Agreement with China Coal Overseas Development Co. Ltd. (CODCO) for extraction of coal from its underground mines. Subsequently, CODCO assigned its service obligations under the contract to M/s Gayatri Projects Limited (GPL), with ECL’s approval. GPL rendered services and raised invoices during January, February, and March 2020, on the basis of which the applicant availed Input Tax Credit (ITC) in its GST returns.

However, GPL uploaded the corresponding outward supply details and filed the relevant GSTR-1 and GSTR-3B returns only in November 2020. Since the invoices were not reflected within the prescribed period, the West Bengal Authority for Advance Ruling (AAR), in its earlier ruling dated 09.08.2021, held that ECL had availed ITC in violation of Rule 36(4) of the CGST Rules and directed reversal of the credit.

The Applicant accordingly reversed the ITC. Thereafter, the Finance (No. 2) Act, 2024 inserted Section 16(5) into the CGST Act with retrospective effect from 01.07.2017, granting relief from the time limitation prescribed under Section 16(4) for certain financial years. Relying on this retrospective amendment, the applicant approached the AAR seeking a ruling on whether it could now reclaim the ITC that had earlier been reversed pursuant to the Authority’s order.

Issue:

Whether, in view of the retrospective insertion of Section 16(5) of the CGST Act by the Finance (No. 2) Act, 2024, the applicant was entitled to reclaim the Input Tax Credit relating to invoices for January, February and March 2020 that had already been reversed pursuant to the earlier Advance Ruling dated 09.08.2021?

Held That:

The Authority observed that the retrospective insertion of Section 16(5) merely relaxes the time limitation for availing ITC prescribed under Section 16(4). The provision was enacted to permit availment of credit relating to specified financial years even after expiry of the original statutory time limit, provided the returns were filed up to 30 November 2021. However, the Authority emphasized that Section 16(5) does not override or dilute the substantive eligibility conditions prescribed under Section 16(2) of the CGST Act, nor does it nullify the restrictions imposed under Rule 36(4) of the CGST Rules.

The Authority noted that the  applicant had originally availed the disputed ITC within the prescribed time. Therefore, the dispute was never related to the limitation under Section 16(4). Rather, the denial of credit arose because GPL had not uploaded the invoice details in the relevant period, resulting in violation of Rule 36(4), which restricted availment of ITC beyond the prescribed percentage in respect of invoices not reflected by suppliers. Consequently, the ineligibility of the credit stemmed from failure to satisfy statutory conditions governing availment of ITC and not from the expiry of the limitation period under Section 16(4).

The Authority further held that the retrospective insertion of Section 16(5) did not create any fresh entitlement in favour of the applicant because the applicant had already availed the credit and the same had been held inadmissible on substantive grounds. Since the amendment only addressed the issue of limitation and not the underlying eligibility of the credit, the amendment did not alter the legal position applicable to the applicant’s case.

The Authority also rejected the applicant’s argument that reclaiming the reversed ITC would not amount to seeking a refund. Referring to Section 150 of the Finance (No. 2) Act, 2024, which expressly provides that no refund shall be granted of any tax paid or ITC reversed which would not have been so paid or reversed had Section 16(5) been in force at all material times, the Authority held that re-availment of previously reversed credit is, in substance, equivalent to a refund of such credit. According to the Authority, any other interpretation would defeat the legislative intent and render the statutory bar contained in Section 150 meaningless.

The West Bengal Authority for Advance Ruling answered the question in the negative and held that the applicant was not entitled to reclaim the ITC that had already been reversed.

Case Name: In Re: Eastern Coalfields Ltd. dated 05.06.2026

To read the complete judgement 2026 Taxo.online 1641