Clause 8 Of Assam GST Reimbursement Scheme Prima Facie Ultra Vires: Gauhati High Court Stays SCN Against Patanjali Foods
The Gauhati High Court found that Clause 8 of the Assam Industries [Tax Reimbursement for Eligible Units] Scheme, 2017, which restricts input tax credit, runs contrary to the Constitutional framework and the provisions of the CGST Act. Consequently, the bench stayed the operation of the show-cause notices (SCN) issued to Patanjali Foods Limited. Justice Manish Choudhury was addressing...
The Gauhati High Court found that Clause 8 of the Assam Industries [Tax Reimbursement for Eligible Units] Scheme, 2017, which restricts input tax credit, runs contrary to the Constitutional framework and the provisions of the CGST Act. Consequently, the bench stayed the operation of the show-cause notices (SCN) issued to Patanjali Foods Limited.
Justice Manish Choudhury was addressing a case in which Patanjali Foods Limited, the assessee, challenged the constitutional validity of Clause 8 of the Assam Industries [Tax Reimbursement for Eligible Units] Scheme, 2017.
In the case at hand, the assessee/petitioner (Patanjali Foods Limited) engages in the fast-moving consumer goods [FMCG] sector and carries on the business in trading, job work and distribution of edible oils, food products and allied consumer goods in the State of Assam.
The Assistant Commissioner of State Tax issued Show Cause Notices to Patanjali to show cause for availing Input Tax Credit [ITC] despite not being eligible for the same as per the provisions of the Assam Industries [Tax Reimbursement for Eligible Units] Scheme, 2017.
The Show Cause Notices are issued under Section 73 and Section 74A[1] read with Section 74A[5][i] of the State Goods and Services Tax Act, 2017, observing that, as per the provisions of Clause 8 of the Reimbursement Scheme, the assessee was not eligible for ITC and, despite that, it availed ITC.
The counsel for Patanjali Foods submitted that a provision, as contained in Clause 8 of the Reimbursement Scheme to deny ITC by the State respondents, is beyond jurisdiction, qua the provisions of the Constitution of India and the CGST Act.
The department argued that the challenge is made only to show cause notices, and the assessee can respond to such show cause notices at first. If any decision is made after submission of the reply to the show cause notices, which the assessee finds prejudicial to it, the assessee still has a remedy of preferring an appeal under Section 107 of the CGST or the SGST Act. Such an approach to challenge a show-cause notice in a writ petition is not to be entertained.
The bench, after examining the provisions of Article 246A & Article 279A of the Constitution of India, and Section 16 & Section 164 of the CGST Act, read with Section 2[87] vis-à-vis Clause 8 of the Reimbursement Scheme, opined that framing of such a provision like Clause 8 in the Reimbursement Scheme, 2017 runs against the afore-mentioned Constitutional and Statutory provisions.
In view of the above, the bench suspended the operation of the show-cause notices till the next date.
The bench listed the matter on 15.12.2025.
Case Title: Patanjali Foods Limited v. The State of Assam and Ors.
Case Number: WP(C)/6430/2025
Counsel for Petitioner/Assessee: Arvind P. Datar, Ashwarya Sharma, P Das, Vaibhav Vyas, Keshav Jatwani, Banshika Podder
Counsel for Respondent/Department: B. Choudhury, B. Chakravarty, and S.C. Keyal