The Madras High Court has ruled in favor of TVL. Ajantha Super Market in a case concerning the denial of Input Tax Credit (ITC) benefits by GST authorities. The case arose when the supermarket's application for waiver of interest and penalty under Section 128A of the GST Act was partially approved, but ITC benefits were denied on the grounds of late availing. This decision came despite the retrospective insertion of Sections 16(5) and 16(6), which restored eligibility for certain ITC claims from July 1, 2017.
The Central Board of Indirect Taxes and Customs (CBIC) had issued Circular No. 238/32/2024, clarifying that such restored ITC claims should not be denied and no rectification application was necessary. However, the authorities did not grant the full benefit, leading to the legal challenge. The court, referencing the Supreme Court's decision in Ratan Melting & Wire Industries, emphasized that CBIC circulars are binding on the authorities.
The court ordered that authorities cannot act contrary to the beneficial circulars issued by the Board. It remanded the matter for further examination to verify if the petitioner meets the conditions under Section 16 and to reconsider the waiver of interest and penalty accordingly. This decision underscores the importance of adhering to statutory amendments and binding circulars in tax administration.
Order Date - 20 January 2026
Parties: TVL. Ajantha Super Market Vs Deputy State Tax Officer and The Deputy Commissioner CT ST, GST Appeals
Facts -
- TVL. Ajantha Super Market, represented by its proprietor, applied for waiver of interest and penalty under Section 128A of the GST Act under the amnesty scheme.
- The department partly allowed the waiver but denied relief relating to Input Tax Credit (ITC), stating it was availed belatedly.
- Meanwhile, Sections 16(5) and 16(6) were retrospectively inserted (effective from 01.07.2017), restoring eligibility for certain ITC claims.
- Despite CBIC Circular No. 238/32/2024 clarifying that such restored ITC need not be denied and no rectification application was required, the authorities rejected the full benefit.
Issue -
- Whether GST authorities can deny ITC and waiver benefits despite retrospective statutory amendments and binding CBIC circular clarifications?
Order -
- The Court held that CBIC circulars are binding on departmental authorities, as settled by the Supreme Court in Ratan Melting & Wire Industries.
- Authorities cannot take a stand contrary to beneficial circulars issued by the Board.
- Retrospective insertion of Sections 16(5) and 16(6) restores eligibility for ITC, subject to verification.
- The matter was remanded to examine whether the petitioner satisfies Section 16 conditions and to reconsider the waiver accordingly.
