2023 (11) TMI 1153 - HC - GST

Input Tax Credit (ITC) - Failure of the supplier to deposit the Tax / GST amount - Failure to produce the Tax Invoice - constitutional validity of provisions of Section 16(2)(c) of the CGST Act and Rule 36(4) of the Central Goods and Services Tax Rules - HELD THAT - It is settled that input tax credit is in the nature of a benefit/concession and not a right extended to the dealer under the statutory scheme. The said benefit can accrue to the assessee only as per the scheme of the statute - It is equally settled that the rule-making authority can provide restrictions in extending the concession . The benefit of an input tax credit can be availed by a purchasing dealer who sells or manufactures goods using raw materials on which tax has been paid only on satisfaction of the conditions for such availment enumerated in the statute. One of the preconditions for the purchasing dealer to claim input tax credit under section 16 of the CGST Act is that he must produce the tax invoice issued by the supplying dealer. Coming to the facts of the cases, the appellants failed to produce the tax invoices despite sufficient opportunities extended. The appellants were issued a show cause notice under section 73(1) of the CGST/SGST Act. The appellants were called for a personal hearing. They did not appear for personal hearing either - The appellants did not discharge the said burden. They failed to produce any evidence to prove that they are entitled to the benefit of input tax credit. That apart, the appellants rushed to the writ court without exhausting the alternative appellate remedy. Constitutional validity of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules - HELD THAT - It is now well settled that any tax legislation may not be easily interfered with. The court must show judicial restraint to interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional. Taxing statutes cannot be placed, tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests - Nothing in the impugned provisions indicates that they discriminate between the purchasing and selling dealers. As stated already, the input tax credit is in the nature of a benefit or concession conferred under the statute. The impugned provisions prescribe certain conditions for the purchasing dealers to avail of the benefit. It is up to the purchasing dealer to avail of the said benefit/concession following those conditions. The prescription of the conditions cannot be considered discriminatory to contravene Article 14 - Nothing indicates that the impugned provisions satisfy the said test and thus manifestly arbitrary and glaringly unconstitutional. Under these circumstances, the challenge to the constitutional validity of the impugned provisions must fail. There are no illegality or impropriety in the impugned judgments - appeal dismissed.

Summary

Issues involved:
Entitlement of purchasing dealer to take credit of input tax under CGST Act; Constitutional challenge to Section 16(2)(c) of CGST Act and Rule 36(4) of CGST Rules.

Entitlement to Input Tax Credit:
The judgment addressed the entitlement of purchasing dealers to claim input tax credit under Section 16 of the Central Goods and Services Tax Act. It emphasized that input tax credit is a benefit granted under the statutory scheme and not an absolute right. The conditions for availing this benefit include possession of a valid tax invoice, proof of receipt of goods or services, and actual payment of tax to the Government. The judgment highlighted the importance of complying with these conditions to claim input tax credit.

Challenges by Appellants:
The appellants, engaged in businesses named M/s. N.S Metals and M/s. Light House, challenged the denial of input tax credit by the Assessing Authority based on discrepancies in their returns. They contested the constitutional validity of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules. The appellants argued that these provisions were discriminatory and arbitrary, violating Article 14 of the Constitution of India.

Validity of Statutory Provisions:
The judgment clarified that the provisions in question do not discriminate between purchasing and selling dealers. It emphasized that the conditions set forth for availing input tax credit are not arbitrary or unreasonable. The court highlighted that tax legislation should not be easily interfered with unless it is manifestly unjust or unconstitutional. The appellants' challenge to the constitutional validity of the provisions was deemed vague and lacking in concrete evidence of discrimination.

Dismissal of Appeals:
Ultimately, the High Court dismissed the appeals, upholding the impugned judgments. The court found no illegality or impropriety in the decisions, while also affirming the right of the appellants to challenge assessment orders through appropriate legal channels. The judgment emphasized the importance of following statutory provisions and fulfilling conditions for claiming input tax credit under the CGST Act.