Facts of the Case

M/S Rounak Trade Links, Belgaum (GSTIN 29BDRPK2649J1ZV), filed a writ petition before the Dharwad Bench of the Karnataka High Court questioning the constitutional validity of Section 16(4) of the CGST Act, 2017 and the corresponding provision of the Karnataka GST Act, read with Rule 61(5) of the KGST Rules, 2017 and Notification No.49/2019-Central Tax, as violative of Articles 14, 19 and 300A of the Constitution — alternatively seeking that the time limit for availing Input Tax Credit under Section 16(4) be read down as procedural and directory rather than mandatory. The petitioner also sought quashing of audit observations dated 28.07.2022 issued by the Deputy Commissioner of Commercial Taxes (Audit-2), Vijayapur. The writ was entertained on account of the constitutional challenge. At the hearing, respondents' counsel jointly submitted that the constitutional validity of Section 16(4) read with Rule 61(5) had already been 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, applying the Supreme Court's rulings on analogous time-limit provisions under State VAT laws in Jayam and Company v. Assistant Commissioner and ALD Automotive Private Limited v. Commercial Tax Officer. In view of this, learned counsel for the petitioner submitted that the petitioner would not press the prayer challenging constitutional validity, or the alternative prayer to read down Section 16(4).

Issues Involved

  1. Whether the Court needed to independently examine the constitutional validity of Section 16(4) of the CGST/KGST Act once the challenge was not pressed by the petitioner in light of contrary precedent from the Andhra Pradesh and Patna High Courts.
  2. Whether the impugned audit observations and consequential notices could be examined on their merits in writ jurisdiction once the constitutional challenge was withdrawn.

Petitioner's Arguments

  • Initially challenged Section 16(4) of the CGST/KGST Act and Rule 61(5) of the KGST Rules as arbitrary, unreasonable and discriminatory, and sought quashing of the audit observations as violative of Articles 14, 19 and 300A.
  • At the hearing, in light of the judgments of the Andhra Pradesh and Patna High Courts upholding the provision, the petitioner's counsel elected not to press the prayer challenging constitutional validity or the alternative prayer to read down Section 16(4).

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the CGST Rules has already been upheld in Thirumalakonda Plywoods (Andhra Pradesh High Court) and Gobinda Construction (Patna High Court).
  • Similar time-limit provisions under the Tamil Nadu VAT Act were upheld by the Supreme Court in Jayam and Company v. Assistant Commissioner, (2016) 15 SCC 125, and ALD Automotive Private Limited v. Commercial Tax Officer, (2019) 13 SCC 225.
  • The challenge to constitutional validity in the present petition ought to be rejected in light of this consistent line of authority.

Court Order/Findings

  • Since the prayer challenging constitutional validity, and the alternative prayer to read down Section 16(4), were not pressed, the Court held it need not examine the constitutional validity of the provision, and relegated the petitioner to the appellate authority under the CGST/KGST Act to challenge the impugned order and show cause notices on their own merits.
  • The writ petition was disposed of without expressing anything on the merits of the orders passed or show cause notices issued by the authorities.
  • The petitioner was granted liberty to avail the statutory remedy under the CGST/KGST Act, with the time spent in prosecuting the writ petition to be excluded while computing limitation for any such appeal or response.

Important Clarification

  • The constitutional validity of Section 16(4) of the CGST/SGST Act, imposing a time limit for availing Input Tax Credit, has been upheld by the Andhra Pradesh High Court in Thirumalakonda Plywoods and the Patna High Court in Gobinda Construction, applying Supreme Court precedent on analogous VAT-era time-limit provisions.
  • Where a taxpayer does not press a constitutional challenge in light of such precedent, the writ court will relegate the taxpayer to the statutory appellate remedy on the merits, excluding the time spent in the writ petition from the limitation period for the appeal.

Sections Involved

  • Section 16(4), CGST Act, 2017 (and corresponding KGST Act provision) — prescribes the time limit within which Input Tax Credit may be availed.
  • Rule 61(5), Karnataka GST Rules, 2017 — procedural rule connected with furnishing of returns and availing ITC.

Decision – In Favour of

Disposed of without adjudication on merits; the constitutional challenge was not pressed in light of contrary High Court precedent, and the petitioner was relegated to the statutory appellate remedy — a neutral, procedural outcome that does not favour either side on the substantive dispute.

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.106045 of 2022 (T-RES)
CNR: Not available
Coram: Anant Ramanath Hegde, J.
Decision Date: 17-11-2023
Disposal Nature: Disposed of, no merits expressed; liberty to avail remedy under CGST/KGST Act

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.