Facts of the Case

M/s K.N. Enterprises, represented by its proprietor and registered under GSTIN 29ANWPN3379A1ZH, filed the present writ petition before the Dharwad Bench of the High Court of Karnataka questioning the constitutional validity of Section 16(4) of the Central Goods and Services Tax Act, 2017 and the corresponding provision of the Karnataka Goods and Services Tax Act, 2017, read with Rule 61(5) of the Karnataka Goods and Services Tax Rules, 2017 and Notification No.49/2019-Central Tax. The petitioner also challenged an order dated 30.03.2023 bearing No.A.No.167/2021/BM/GST passed against it, contending that the time limit prescribed under Section 16(4) for availing input tax credit was arbitrary, discriminatory and violative of Articles 14, 19 and 300A of the Constitution of India, and alternatively sought that the provision be read down as directory rather than mandatory.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017, prescribing a time limit for availing input tax credit, and Rule 61(5) of the KGST Rules, are unconstitutional as violative of Articles 14, 19 and 300A.
  2. Whether, in view of the petitioner not pressing the constitutional challenge, the impugned order and show cause notices could be examined by the writ court, or whether the petitioner ought to be relegated to the statutory appellate remedy.

Petitioner's Arguments

  • Initially contended that Section 16(4) of the CGST/KGST Act read with Rule 61(5) of the KGST Rules was illegal, unreasonable, arbitrary and discriminatory, liable to be struck down, or in the alternative read down as merely directory.
  • Ultimately, on being apprised of the settled position, submitted that the prayer challenging the constitutional validity of Section 16(4), and the alternative prayer to read it down, would not be pressed.

Respondent's Arguments

  • Jointly submitted that the constitutional validity of Section 16(4) of the CGST/KGST Act, 2017 read with Rule 61(5) of the KGST Rules already stood upheld by the Andhra Pradesh High Court in Thirumalakonda Plywoods v. The Assistant Commissioner and by the Patna High Court in Gobinda Construction v. Union of India.
  • Submitted that the Supreme Court, in Jayam and Company v. Assistant Commissioner and ALD Automotive Private Limited v. Commercial Tax Officer, had upheld similar time-limit provisions under the Tamil Nadu VAT Act, and the present challenge ought therefore to be rejected.

Court Order/Findings

  • Recorded that the petitioner did not press the challenge to the constitutional validity of Section 16(4) and the alternative prayer to read it down.
  • Held that it need not examine the constitutional validity of the provision, and disposed of the writ petition without expressing any opinion on the merits of the impugned order or the show cause notices.
  • Directed that the petitioner was at liberty to avail the statutory appellate remedy under the CGST Act and KGST Act in respect of the impugned order, and to respond to the show cause notices as provided under law.
  • Directed that, if the petitioner availed such remedy, the time spent in prosecuting the writ petition would be excluded while computing limitation for filing the appeal or responding to the notices.

Important Clarification

  • The constitutional validity of Section 16(4) of the CGST/KGST Act, 2017, prescribing a time limit for claiming input tax credit, has been upheld by the Andhra Pradesh High Court (Thirumalakonda Plywoods) and the Patna High Court (Gobinda Construction), a position several other High Courts, including Karnataka, have followed while disposing of similar batches of writ petitions.
  • Taxpayers withdrawing or not pressing such constitutional challenges in light of this precedent are commonly granted the benefit of exclusion of the time spent in the writ petition while computing limitation for filing a statutory appeal.

Sections Involved

  • Section 16(4) of the Central Goods and Services Tax Act, 2017 – prescribes the time limit within which input tax credit for a financial year may be availed.
  • Rule 61(5) of the Karnataka Goods and Services Tax Rules, 2017 – procedural rule connected to the filing of returns relevant to the time limit for claiming input tax credit.
  • Section 107 of the Karnataka Goods and Services Tax Act, 2017 – provides the statutory appellate remedy against orders passed by the adjudicating authority, which the petitioner was relegated to.

Decision – In Favour of

No decision on merits — the petitioner did not press the constitutional challenge to Section 16(4), which stands upheld per the Andhra Pradesh and Patna High Courts referenced by the respondents; the assessee was, however, given liberty to contest the underlying order on merits before the statutory appellate authority, with limitation protection extended in its favour.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Karnataka, Dharwad Bench
  • Case No.: WP No.103355 of 2023
  • CNR: 2023:KHC-D:14494
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 11-12-2023
  • Disposal Nature: Disposed of, following batch precedent

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