Constitutional validity of Section 16(4) of the CGST Act challenged

[Bimal jain]

The Hon’ble Calcutta High Court in M/s. Jyote Motors Bengal Pvt. Ltd. v. Additional Director, Directorate General of Goods & Service Tax Intelligence [2023 (6) TMI 682 - CALCUTTA HIGH COURT] directed the Jyote Motors Bengal Pvt. Ltd ("the Petitioner”) to deposit 10 per cent of disputed tax amount within 2 weeks so that, the court can entertain the writ, also directed the Revenue Department not to take any coercive action if the payment is made within the stipulated time period.

Facts:

The Petitioner has challenged the appealable order before the Calcutta High Court challenging Section 16(4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Issue

Whether Section 16(4) of the CGST Act is constitutionally valid?

Held

The Hon’ble Calcutta High Court in 2023 (6) TMI 682 - CALCUTTA HIGH COURT held as under:

• Observed that, the Petitioner has challenged the appealable orders which were passed by the Revenue Department dated January 19, 2023.
• Noted that, since the writ involves pure question of law i.e., the constitutional validity of Section 16(4) of the CGST Act.
• Stated that, the writ will be entertained only if the Petitioner makes payment of 10% of the disputed tax amount within two weeks.
• Directed the Revenue Department not to take any coercive action if the payment is made within the stipulated time period.
• Further, directed the Revenue Department to file an affidavit-in-opposition after the summer vacation and subsequently directed the Petitioner to file a reply to the affidavit within two weeks thereafter.
• Listed the matter for final hearing in August 2023.

Relevant provision

Section 16(4) of the CGST Act:

“(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

(Author can be reached at [email protected])

Discussions to this article

[Sadanand Bulbule]

Dear Sir

The similar question on the constitutional validity of Section 16[4] of the GST Act came up before the Karnataka High Court in the case of Prabhayya Basayya Dandavatimath Vs. Commissioner of Central GST, Service Tax & Central Excise  - 2023 (7) TMI 147 - KARNATAKA HIGH COURT in Writ Petition No.103531 of 2023. Since the petitioner did not press this issue before the court, the petition was disposed of on 07/06/2023 without any ruling.

[KASTURI SETHI]

Dear Sir,

Time limitation for availing Cenvat Credit has been in force since the year 2001. Hence challenging constitutional validity of Section 16(4) of CGST Act will prove a futile exercise. Time limitation means no chance for taking credit twice. Even in the era of high technology some assessees do not hesitate to take ITC fraudulently. Govt. has busted cases involving huge amount of ITC availed fraudulently. In such a situation, challenging legal validity is a sheer wastage of Govt's and Courts' precious time.

 

[Sanjay Dwivedi]

I would be filing a Writ Petition in Bombay High Court in this week.

We may notice that GSTR-3B cannot be filed unless one pays the cash component of the tax liability. For ex. if my tax liability is Rs. 100, and I am entitled to claim ITC of Rs. 70, I cannot file the GSTR-3B unless I pay the differential Rs. 30.

Now, the law does not have any condition that you cannot claim ITC unless you pay the cash component of the tax liability. This condition has been imported through backdoor by the GST Network. Ideally, it should be possible for me to claim ITC of Rs. 70 even if I am not in position to pay Rs. 30.

Secondly, even if this condition is read into the law (through sec 16 (2) (d)), then it is unreasonable.

[KASTURI SETHI]

Dear Sir,

It is worthwhile to go through judgement dated 18.7.23 of A.P. High Court (W.P.No.24235 of 2022) in the case of Thirumalakonda Plywoods, Vs. The Assistant Commissioner – State Tax, Anantapur Circle – 1, Anantapuramu Division, Anantapur and two others.

The Hon'ble High Court has rejected the petition of the party wherein constitutional validity of Section 16(4) of the CGST Act. was challenged.

[AdvSanjay Dwivedi]

Thank you Kasturi ji. Will take this into account.

[KASTURI SETHI]

Sh. Sanjay Dwivedi, Advocate.

Sir, I am highly thankful to you for your kind response.

K.L.SETHI