2023 (12) TMI 835 - HC - GST

Input Tax Credit (ITC) - eligibility criteria - Section 16(4) - Achallenge to its validity on the ground that it violates Article 14, 19(1)(g), and 300A of the Constitution of India; whether the non-obstante clause in Section 16(2) of the APGST, CGST Act, 2017 would prevail Section 16(4) of the APGST/CGST Act, 2017. - Scope for passing interim order - requirement of affidavit from the respondent for final adjudication - HELD THAT - The Hon ble Supreme Court in ALD AUTOMOTIVE PVT. LTD. VERSUS THE COMMERCIAL TAX OFFICER NOW UPGRADED AS THE ASSISTANT COMMISSIONER (CT) ORS. 2018 (10) TMI 814 - SUPREME COURT while considering a challenge to Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006 requiring the claim for Input Tax Credit to be made within 90 days from the date of purchase or before the end of the financial year whichever is later as being ultra vires to a statutory claim of the Act, considered as to the principles for interpreting law dealing with economic activities. While doing so, the Hon ble Supreme Court referred to the decision of the Constitution Bench in RK. GARG VERSUS UNION OF INDIA AND OTHERS 1981 (11) TMI 57 - SUPREME COURT wherein it was held that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It was further held that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any Doctrinaire or straight jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, larger play has to be allowed to the legislature. In the ALD Automotive Private Limited an alternate submission was made on behalf of the assessee that Section 19(11) of the Tamil Nadu Value Added Tax Act cannot be held to be mandatory and it is only a directory provision non-compliance with which cannot be a ground of denial of Input Tax Credit to the appellant therein. After noting the conditions enumerated in Section 19 of the said Act, it was held that the conditions under which the concession and benefit is given is always to be strictly construed and if the contention that there is no time period for claiming Input Tax Credit is accepted, the provision becomes too flexible and gives rise to a large number of difficulties including difficulty in verification of claim of Input Tax Credit. Further it was held that the taxing statutes contain self-contained scheme of levy, computation and collection of taxes. The time under which a return is to be filed for the purpose of assessment of tax cannot be dependent on the will of a dealer. Ultimately it was held that the time period prescribed under Section 19(11) of the Tamil Nadu Value Added Tax Act was mandatory. The Hon ble Supreme Court in TVS Motor Company Limited 2018 (10) TMI 887 - SUPREME COURT after taking note of the decision in ALD Automotive held that ITC is a form of concession which is provided by the Act; it cannot be claimed as a matter of right but only in terms of the provision of the statute; therefore the conditions mentioned had to be fulfilled by the dealer. Very recently, the Hon ble Division Bench of the High Court of Andhra Pradesh had considered an identical case as that of the case on hand, wherein a pari materia provision under the Andhra Pradesh General Sales Tax, 2017 namely Section 16(4) of the Act was considered in a challenge to its validity on the ground that it violates Article 14, 19(1)(g), and 300A of the Constitution of India; whether the non-obstante clause in Section 16(2) of the APGST, CGST Act, 2017 would prevail Section 16(4) of the APGST/CGST Act, 2017. There are no ground to grant the relief sought for by the petitioner in the writ petition - the appeal as well as the writ petition are dismissed.

Summary

Issues Involved:

1. Refusal to Grant Interim Orders
2. Challenge to Order-in-Appeal and Refund of Excess Tax
3. Eligibility for Input Tax Credit (ITC)
4. Interpretation of Section 16 of GST Act
5. Fraudulent Claim and Imposition of Penalty
6. Constitutional Validity of Section 16(4) of GST Act

Summary:

1. Refusal to Grant Interim Orders:
The intra-court appeal was filed against the order dated 13.06.2023, where the Single Bench held that there was no scope for passing any interim order and required an affidavit from the respondent for final adjudication. The respondents were directed to file their affidavit-in-opposition within a specified time frame.

2. Challenge to Order-in-Appeal and Refund of Excess Tax:
The appellant challenged the order-in-appeal dated 04.01.2023 under Section 107 of the GST Act, seeking a refund of Rs. 28,63,680/- alleged to have been recovered in excess of 10% of the disputed tax amount and to prohibit further cohesive action. The order denied ITC for the period from November 2018 to March 2019 due to the returns being filed beyond the statutory time limit stipulated in Section 16(4) of the GST Act.

3. Eligibility for Input Tax Credit (ITC):
The appellant argued that ITC is taken through books of account immediately on receipt of goods and services as per the first proviso to Section 16(2) of the GST Act, and the time limit under Section 16(4) cannot override this scheme. The department contended that returns filed beyond the statutory time limit make the appellant ineligible for ITC, necessitating the reversal of the credit taken and the imposition of a penalty for wilful misstatement.

4. Interpretation of Section 16 of GST Act:
The appellant contended that Section 16(2) has an overriding effect on Section 16(4) based on the statutory language "entitled to take credit." The respondents argued that the non-obstante clause in Section 16(2) does not limit the operation of Section 16(4) and that both sections complement each other in restricting the provisions. The legislative intent is not to make Section 16(4) otiose by applying Section 16(2).

5. Fraudulent Claim and Imposition of Penalty:
The respondents justified the imposition of a penalty, arguing that the appellant committed fraud by making a false representation in the GSTR-3B return and claiming ineligible ITC. The court referred to various judgments, including ALD Automotive Private Limited and TVS Motor Company Limited, which upheld the principle that ITC is a concession subject to strict compliance with statutory conditions.

6. Constitutional Validity of Section 16(4) of GST Act:
The court upheld the validity of Section 16(4), rejecting the argument that the non-obstante clause in Section 16(2) overrides Section 16(4). The court agreed with previous judgments that the conditions under which ITC is claimed must be strictly construed and that the statutory scheme does not violate constitutional rights.

Conclusion:
The appeal and the writ petition were dismissed, with the court finding no grounds to grant the relief sought by the petitioner. No costs were awarded.