2023 (9) TMI 902 - HC - GST

Restriction availing on Input Tax Credit (ITC) - Constitutional validity of Section 16(4) of the Central Goods and Services Tax Act (CGST Act) and Section 16(4) of the Bihar Goods and Services Tax Act, 2017 - Denial of entitlement of Input Tax Credit (ITC) for delayed filing of return - HELD THAT - There is no gainsaying that language of Section 16(4) of the CGST/BGST Act, is plain and unambiguous with clear stipulation that a registered person cannot avail the benefit of ITC in respect of any invoice or debit note for supply of goods or services or both after due date of furnishing the return under Section 39 of the CGST/BGST Act for the month of September following the end of financial year to which such invoice or invoices of such debit note pertain or furnishing of the relevant annual return, whichever is earlier. It is in that background that the petitioners have elected to question the constitutional validity of Section 16(4) of the CGST/BGST Act itself being violative of Articles 14 and 300A of the constitution of India. Whether ITC per se is a vested right, the denial of which by operation of sub-section (4) of Section 16 of the CGST/ BGST Act would amount to infringement of the constitutional right under Article 300-A of the Constitution, is one of the primordial questions which requires consideration by this Court in the wake of the nature of challenge put by the petitioners to the validity of the aforesaid provision. Right to property under Article 300-A of the Constitution of India has been held to be a human right as also a constitutional right which cannot be taken away except in accordance with law. This legal proposition is unexceptionable. Dealing with the expression 'deprive of his right of property' under Article 300-A of the Constitution of India the Supreme Court in case of JILUBHAI NANBHAI KHACHAR VERSUS STATE OF GUJARAT 1994 (7) TMI 347 - SUPREME COURT has noted that the property in legal sense means an aggregate of rights which are guaranteed and protected by law. It extends to every species of valuable right and interest, more particularly, ownership and exclusive right to a thing, the right to dispose of the thing in every legal way, to possess it, to use it, and to exclude everyone else from interfering with it. The dominion or indefinite right of use or disposition which one may lawfully exercise over particular things or subjects is called property . Whether or not, the language of Section 16 of the CGST/BGST Act suffers from any ambiguity? - HELD THAT - ITC is not unconditional and a registered person becomes entitled to ITC only if the requisite conditions stipulated therein are fulfilled and the restrictions contemplated under sub-section (2) of Section 16 do not apply. One of the conditions to make a registered person entitled to take ITC is prescribed under sub-section (4) of Section 16. The right of a registered person to take ITC under sub-section (1) of Section 16 of the Act becomes a vested right only if the conditions to take it are fulfilled, free of restrictions prescribed under sub-section (2) thereof. Submissions have been advanced on behalf of the petitioners that sub-section (4) of Section 16 imposes unreasonable and disproportionate restriction on the right to freedom of trade and profession guaranteed under Article 19(1)(g) of the Constitution and is, therefore, violative of Article 302 of the Constitution and is in teeth of Article 13 of the Constitution. This argument is founded on the ground of absence of any rationale behind fixation of a cut-off-date for filing of return - there are no merit in the submissions so advanced, which deserves to be outrightly rejected. Thus, sub-section (4) of Section 16 of the CGST/ BGST Act are constitutionally valid and are not violative of Articles 19(1)(g) and Article 300-A of the Constitution of India. The said provision is not inconsistent with or in derogation of any of the fundamental right guaranteed under the Constitution of India. There are no merit in these writ-applications, which are accordingly dismissed.

Summary

Issues Involved:
1. Constitutional Validity of Section 16(4) of the CGST/BGST Act
2. Procedural vs. Substantive Conditions for Availing ITC
3. Validity of GSTR-3B as a Return under Section 39(1) of the CGST Act

Summary:

1. Constitutional Validity of Section 16(4) of the CGST/BGST Act:

The petitioners challenged the constitutional validity of Section 16(4) of the CGST/BGST Act, arguing that it denies entitlement of Input Tax Credit (ITC) after the due date of furnishing returns, which is violative of Articles 14 and 300A of the Constitution of India. They contended that ITC is a vested right under Article 300A and cannot be taken away due to late filing of returns. The court found that Section 16(4) of the CGST/BGST Act is clear and unambiguous, stipulating that a registered person cannot avail ITC after the due date. The court held that ITC is not an unconditional right but subject to conditions and restrictions under the Act. The court concluded that Section 16(4) is constitutionally valid and not violative of Articles 19(1)(g) and 300A of the Constitution.

2. Procedural vs. Substantive Conditions for Availing ITC:

The petitioners argued that the conditions prescribed in Section 16(4) are merely procedural and cannot override the substantive conditions for availing ITC under Sections 16(1) and 16(2). They claimed that the non-obstante clause in Section 16(2) should prevail over Section 16(4). The court held that the language of Section 16 is clear, and the conditions under Section 16(4) are mandatory for availing ITC. The court rejected the argument that Section 16(4) should be read down, stating that there is no ambiguity in the provision that would necessitate such an interpretation.

3. Validity of GSTR-3B as a Return under Section 39(1) of the CGST Act:

The petitioners sought a declaration that GSTR-3B cannot be treated as a return prescribed under Section 39(1) of the CGST Act, arguing that it does not satisfy the parameters of a return contemplated under Section 39(1). They also challenged Rule 61(5) of the CGST Rules, which prescribes Form GSTR-3B as a return under Section 39(1), as ultra vires. The court did not find merit in this argument, stating that the statutory scheme under Section 16 of the CGST/BGST Act with the restriction under sub-section (4) has uniform application and is not arbitrary.

Conclusion:

The court dismissed the writ applications, upholding the constitutional validity of Section 16(4) of the CGST/BGST Act and confirming that the conditions for availing ITC under this section are mandatory and not merely procedural. The court also rejected the challenge to the validity of GSTR-3B as a return under Section 39(1) of the CGST Act.