Chhattisgarh High Court Upholds Constitutional Validity Of S. 16(4) Of CGST Act

The Chhattisgarh High Court upheld the constitutional validity of Section 16(4) of the CGST Act, which specifies the time frame in which a registered taxpayer is required to claim input tax credit.

The bench of Justice Sanjay K. Agrawal and Justice Radhakishan Agrawal has observed that Section 16(4) of the CGST Act is violative of neither Article 14 of the Constitution nor Articles 19(1)(g) and 300A of the Constitution; however, the ground under Article 19(1)(g) is not available to the petitioner, as the petitioner is not a citizen, and therefore Article 19(1)(g) is not available to the petitioner.

The petitioner/assessee is a proprietorship firm engaged in the trading of oils and allied products. The petitioner, being a trader, regularly purchases goods and avails certain services in relation to the business. The petitioner, being a registered firm under the specified GST Acts, is required to furnish its monthly return under Section 39 of the CGST Act read with Rule 61 of the Central Goods and Services Tax Rules, 2017 in Form GSTR-3B.

The petitioner for the financial year 2018-19 filed a return under Section 39 of the CGST Act in Form GSTR-3B for the month of March 2019 on November 13, 2019. The return was specifically filed for the specified period, and late fees were also paid in accordance with Section 47 of the CGST Act for the period of March 2019 in Form GSTR-3B of April 2019. Interest under Section 50 was also paid in the return for the period of March 2019. The ITC claimed in the return for the month of March 2019 was an eligible ITC for the specified period in terms of Section 16(2).

The petitioner was served with a demand letter by the respondent or department demanding an amount to be paid, alleging that input tax credit (ITC) is availed of in contravention of Section 16(4) of the CGST Act, along with interest under Section 50 of the said Act.

The petitioner questioned the constitutional validity of Section 16(4) of the CGST Act and the proceedings initiated for recovery of Rs. 9,43,920, along with interest and penalties, stating that the recovery under Section 16(4) is violative of Articles 14, 19(1)(g), and 300A of the Constitution.

The petitioner contended that Section 16(4) is merely procedural in nature and cannot override substantive conditions as mandated under Sections 16(1) and 16(2).

The department contended that the provision of Section 16(4) of the CGST Act is a constitutionally valid provision and that Section 16(4) is an integral part of the statute. Therefore, the conditions prescribed by Section 16(4) for the availability of ITC are binding on the taxpayer. Section 16(4) of the CGST Act is neither violative of Article 14 nor violative of Articles 19(1)(g) and 300A of the Constitution, and the writ petition being premature is liable to be dismissed.

The court held that the petitioner has failed to make out a case to question the constitutional validity of Section 16(4) of the CGST Act, as it is a constitutionally valid piece of legislation.

Counsel For Petitioner: Palash Soni

Counsel For Respondent: Ramakant Mishra

Case Title: M/s Jain Brothers Versus UOI

Case No.: Writ Petition (T) No.191 of 2022

Click Here To Read The Order