Eastern Coalfields Limited (ECL) engaged China Coal Overseas Development Co. Ltd. for a mining project, later assigning the service contract to Gayatri Projects Limited (GPL), which issued GST invoices for services rendered in early 2020. ECL initially claimed Input Tax Credit (ITC) on these invoices. However, GPL's delayed filing of GSTR-1 and GSTR-3B returns led to ECL being denied ITC by the West Bengal AAR due to non-compliance with Rule 36(4). Consequently, ECL reversed the credit and recovered the tax from GPL.
Following the retrospective insertion of Section 16(5), ECL sought to reclaim the reversed ITC, arguing that the amendment allowed for such action. The issue was whether this amendment permitted the reclaiming of ITC previously reversed due to an advance ruling. The Authority clarified that Section 16(5) only extends the time limit for availing ITC without granting new rights to reclaim reversed credits.
Read More: Orissa High Court - Date of communication of order must be excluded while computing appeal limitation, and an appeal filed within the condonable period cannot be rejected as time-barred [Order attached]
The Authority emphasized that the retrospective amendment did not alter the original ruling's conclusion, as the conditions under Section 16 still applied. Re-availing the reversed ITC would effectively be a refund request, which is barred by Section 150 of the Finance (No. 2) Act, 2024. Thus, the amendment did not entitle ECL to reclaim the reversed ITC, as it would contravene legislative intent. The Authority concluded that the retrospective provision did not grant any fresh entitlement to re-avail the credit reversed earlier.
Order Date - 05 June 2026
Facts -
- Eastern Coalfields Limited (ECL) engaged China Coal Overseas Development Co. Ltd. for a Longwall Mining Project, and the service contract was subsequently assigned to Gayatri Projects Limited (GPL), which raised GST invoices for services rendered during January, February and March 2020.
- They availed ITC on these invoices, but GPL filed its GSTR-1 and GSTR-3B returns belatedly in November 2020 owing to the COVID-19 pandemic and financial constraints.
- ECL was denied ITC by the West Bengal AAR in its earlier ruling on the ground of non-compliance with Rule 36(4), following which the company reversed the credit and recovered the tax amount from GPL.
- They again approached the Authority after the retrospective insertion of Section 16(5), contending that the amendment entitled it to reclaim the ITC that had already been reversed.
Issue -
- Whether the retrospective insertion of Section 16(5) of the CGST Act allows a taxpayer to reclaim Input Tax Credit already reversed pursuant to an earlier advance ruling.
Order -
- The Authority observed that Section 16(5) only overrides the time restriction prescribed under Section 16(4) for specified financial years and does not create any new substantive right to reclaim ITC that had already been reversed pursuant to an earlier ruling.
- The Authority held that even after the retrospective amendment, the other conditions prescribed under Section 16, particularly Section 16(2), continue to apply. Since the applicant's eligibility had already been examined under these provisions, the amendment did not alter the earlier conclusion.
- The Authority noted that the applicant had originally availed the ITC within the prescribed timeline and later reversed it in compliance with the earlier advance ruling. Therefore, the retrospective amendment did not create any fresh entitlement to re-avail the reversed credit.
- The Authority further held that reclaiming the reversed ITC would, in substance, amount to seeking a refund of such credit. Since Section 150 of the Finance (No. 2) Act, 2024 expressly bars refund of tax paid or ITC reversed, permitting re-availment would defeat the legislative intent.
