2025 (1) TMI 112 - HC - GST

Constitutional validity of provisions of section 16(4) of CGST Act/ SGST Act, 2017 - violative of Article 14, 19 and 300A of the Constitutional of India or not - time limit for taking input tax credit - HELD THAT - The issue in controversy involved in the present petition is directly and squarely covered by the judgment of this Court in the case of M/S. SADHANA ENVIRO ENGINEERING SERVICES VERSUS THE JOINT COMMISSIONER OF CENTRAL TAX; THE PRINCIPAL COMMISSIONER OF CENTRAL TAX BENGALURU; UNION OF INDIA; STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY, BANGALORE 2024 (9) TMI 1648 - KARNATAKA HIGH COURT where it was held that ' The parties are relegated to the stage of show cause notice at Annexure-C dated 13.02.2020 issued by the respondent(s) and the respondents are directed to give effect to and implement the amended provisions contained in Section 118 of The Finance (No.2) Act, 2024 relating to insertion of Section 16(5) to the CGST Act / KGST Act by providing sufficient and reasonable opportunity and hear the petitioner and proceed further in accordance with law within a period of one month from the date of receipt of a copy of this order.' Conclusion - The introduction of Section 16(5) extends the timeline for availing input tax credit, providing relief to assessees and impacting pending legal challenges to previous provisions. The impugned Order at Annexure-D dated 28.02.2023 and Summary at Annexure-E dated 28.02.2023 are hereby quashed - petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

• Whether the provisions of Section 16(4) of the CGST/SGST Act, 2017, are illegal, unreasonable, arbitrary, discriminatory, and violative of Articles 14, 19, and 300A of the Constitution of India.
• Whether the time limit for taking input tax credit under Section 16(4) should be interpreted as procedural and directory rather than mandatory.
• Whether the impugned order and consequential actions taken under the KGST/CGST Act, 2017, are violative of constitutional rights and should be quashed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Section 16(4) of the CGST/SGST Act, 2017

• Relevant legal framework and precedents: The petitioner challenged the legality of Section 16(4) under the CGST/SGST Act, 2017, claiming it violated constitutional rights under Articles 14, 19, and 300A.
• Court's interpretation and reasoning: The court referred to the precedent set in the case of M/s. Sadhana Enviro Engineering Services, where similar issues were addressed, and noted the insertion of Section 16(5) by "The Finance (No.2) Act, 2024," which extended the time limit for availing input tax credit.
• Key evidence and findings: The court noted the legislative changes brought by "The Finance (No.2) Act, 2024," which allowed for an extended period to claim input tax credit, thus addressing the petitioner's concerns.
• Application of law to facts: The court applied the amended provisions of Section 16(5), which superseded the earlier limitations of Section 16(4), rendering the petitioner's challenge moot.
• Treatment of competing arguments: The court acknowledged the arguments from both sides but found the legislative amendment to be a decisive factor in resolving the issue.
• Conclusions: The court concluded that the petitioner's challenge to Section 16(4) was addressed by the legislative amendment, and thus, the issue was resolved.

Issue 2: Interpretation of the Time Limit for Input Tax Credit

• Relevant legal framework and precedents: The petitioner sought to have the time limit for availing input tax credit under Section 16(4) interpreted as procedural and directory.
• Court's interpretation and reasoning: The court did not explicitly rule on this interpretation due to the legislative amendment that extended the time limit, making the specific interpretation unnecessary.
• Key evidence and findings: The court relied on the amendment in Section 16(5), which allowed for an extended period for claiming input tax credit, thus addressing the petitioner's concerns.
• Application of law to facts: The court applied the amended provisions, which effectively rendered the question of interpretation moot.
• Treatment of competing arguments: The court did not delve into competing interpretations due to the legislative change.
• Conclusions: The court concluded that the legislative amendment resolved the issue without the need for further interpretation of Section 16(4).

Issue 3: Quashing of the Impugned Order

• Relevant legal framework and precedents: The petitioner challenged the validity of the impugned order under the KGST/CGST Act, 2017.
• Court's interpretation and reasoning: The court quashed the impugned order and directed the respondents to implement the amended provisions of Section 16(5).
• Key evidence and findings: The court found that the legislative amendment addressed the petitioner's grievances, warranting the quashing of the impugned order.
• Application of law to facts: The court applied the amended provisions, directing the respondents to provide a reasonable opportunity to the petitioner and proceed according to law.
• Treatment of competing arguments: The court did not express opinions on other prayers or challenges to statutory provisions, leaving them open for future consideration.
• Conclusions: The court quashed the impugned order and directed compliance with the amended provisions, resolving the issue.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "In view of the aforesaid amendment by inserting Section 16(5) to the CGST / KGST Act, the present petition deserves to be disposed of relegating the parties to the original authority to implement and give effect to the said provisions."
• Core principles established: The legislative amendment extending the time limit for availing input tax credit under Section 16(5) effectively addressed the petitioner's challenges, rendering further interpretation of Section 16(4) unnecessary.
• Final determinations on each issue: The court disposed of the petition in terms of the legislative amendment, quashed the impugned order, and directed compliance with the amended provisions while leaving other contentions open for future consideration.