2021 (8) TMI 877 - HC - GST

Vires of Section 16(2)(c) of Central Goods and Services Tax Act, 2017 - input tax credit - Denial of input tax credit on the ground that the petitioner has already paid tax on the ground that the selling dealer did not deposit the tax with the Government revenue would amount to double taxation - HELD THAT - The issues require consideration. Hence, rule. Since legislation framed by the Parliament is under challenge, let there be notice to the learned Attorney General. For the limited purpose of considering the petitioner s request for interim relief for removing attachment of the Tax Credit Account, let notice be returnable on 23.08.2021 .

Summary

Issues: Challenge to vires of Section 16(2)(c) of Central Goods and Services Tax Act, 2017; Denial of input tax credit; Attachment of input tax credit account.

The judgment involves a challenge to the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017. The petitioner contends that this provision, which conditions the eligibility for claiming input tax credit on the actual payment of tax to the government by the selling dealer, violates Articles 14, 19(1)(g), and 300A of the Constitution of India. The petitioner argues that denying input tax credit based on the selling dealer's failure to deposit tax amounts to double taxation, as the petitioner has already paid CGST on the purchases. The petitioner's counsel highlights similar challenges pending in various High Courts across the country and presents judgments where such provisions have been read down or struck down as unconstitutional. The petitioner also raises concerns about the attachment of the input tax credit account due to non-deposit of tax by the selling dealer, emphasizing that the attachment should have been lifted after the prescribed period under the CGST Act.

The High Court acknowledges the issues raised and decides to issue a rule considering the challenge to the legislation by the Parliament. Notice is directed to the learned Attorney General due to the constitutional implications of the challenge. The Respondent No. 1, Union of India, represented by the Asstt. Solicitor General, waives notice along with the Attorney General. Additionally, Respondents No. 2 and 3, represented by counsel, also waive notice. For the interim relief sought by the petitioner regarding the removal of the attachment on the Tax Credit Account, the court sets the returnable date for further proceedings on 23.08.2021.

In conclusion, the judgment addresses the complex legal issues surrounding the denial of input tax credit, the constitutional validity of statutory provisions, and the procedural aspects of seeking interim relief in matters related to taxation laws. The court's decision to issue a rule and involve the Attorney General reflects the significance of the constitutional challenge raised by the petitioner, highlighting the importance of clarifying the legal principles governing input tax credit under the GST regime.