Facts of the Case

The petitioner, M/s. Gokak Taluka Mahila Supplementary Nutrition Products Center (GSTIN-29AAAAG8475E1ZH), represented by its President, approached the High Court of Karnataka, Dharwad Bench, challenging the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the KGST Rules, 2017, and Notification No. 49/2019-Central Tax, on the ground that the time limit these provisions impose for availing input tax credit is arbitrary and discriminatory. The petitioner also sought quashing of an order bearing No. ACCT/A-1/ORDER-S73/22-23/B dated 27.06.2022 passed by the Assistant Commissioner of Commercial Taxes (Audit-1), Belagavi. The writ petition was entertained by the Court solely because a constitutional challenge had been raised; otherwise the petitioner had an alternate statutory remedy. At the hearing on 17.11.2023, counsel for the respondents pointed to binding precedent upholding similar provisions.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017 and Rule 61(5) of the KGST Rules, 2017, imposing a time limit for availing input tax credit, are unconstitutional as violative of Articles 14, 19 and 300A of the Constitution.
  2. Whether the impugned assessment order dated 27.06.2022 and related notices are liable to be quashed.
  3. Whether the petitioner has an efficacious alternate remedy under the CGST/KGST Act.

Petitioner's Arguments

  • Section 16(4)'s time limit for claiming input tax credit is arbitrary, unreasonable and discriminatory, violating Articles 14, 19 and 300A of the Constitution.
  • Rule 61(5) of the KGST Rules and Notification No. 49/2019-Central Tax are ultra vires.
  • In the alternative, the time limit in Section 16(4) should be read down as directory rather than mandatory.
  • The impugned order dated 27.06.2022 raising demand is unreasonable, arbitrary, oppressive and excessive.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the CGST Rules already stands upheld in Thirumalakonda Plywoods vs The Assistant Commissioner (Andhra Pradesh High Court) and Gobinda Construction vs Union of India (Patna High Court).
  • Similar time-limit provisions under the Tamil Nadu Value Added Tax Act were held constitutional by the Supreme Court in Jayam and Company vs Assistant Commissioner (2016) 15 SCC 125 and ALD Automotive Private Limited vs Commercial Tax Officer (2019) 13 SCC 225.
  • Given this body of precedent, the constitutional challenge deserves outright rejection.

Court Order/Findings

  • At the hearing, petitioner's counsel informed the Court that the constitutional challenge to Section 16(4) and the alternative prayer to read it down as directory would not be pressed; this submission was placed on record.
  • Since the constitutional challenge was not pressed, the Court held it need not examine the vires of Section 16(4)/Rule 61(5), and confined itself to relegating the petitioner to the statutory appellate remedy against the impugned order and show-cause notices, without expressing any opinion on merits.
  • The petitioner was granted liberty to avail the remedy available under the CGST Act and KGST Act in respect of the impugned order and notices.
  • Time spent in prosecuting the writ petition was directed to be excluded while computing limitation for filing an appeal or responding to the notices.

Important Clarification

  • Where a taxpayer withdraws a constitutional challenge to Section 16(4) in light of contrary High Court precedent, courts will decline to adjudicate the vires question and instead relegate the assessee to the statutory appellate remedy.
  • Withdrawal of such a challenge does not amount to a finding on the merits of the underlying assessment order or show-cause notice.
  • Courts routinely direct that time spent in prosecuting an unsuccessful or withdrawn writ petition be excluded while computing the limitation period for filing a statutory appeal.

Sections Involved

  • Section 16(4), CGST Act, 2017 / KGST Act, 2017 — prescribes the time limit for availing input tax credit.
  • Rule 61(5), KGST Rules, 2017 — procedural rule tied to the ITC time limit.
  • Notification No. 49/2019-Central Tax — notification challenged as discriminatory.
  • Articles 14, 19 and 300A, Constitution of India, 1950 — grounds on which the provisions were challenged.

Decision – In Favour of

The writ petition was disposed of with liberty to the petitioner to pursue the statutory appellate remedy, expressly without any finding on the merits of the impugned order or notices. This is neither a clean win for the assessee nor the department — it is a disposal with directions that leaves the substantive dispute to be fought out before the appellate authority.

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. 102495 of 2023 (T-RES)
  • CNR: Not available
  • Coram: Hon'ble Mr Justice Anant Ramanath Hegde
  • Decision Date: 17 November 2023
  • Disposal Nature: Disposed of; constitutional challenge to Section 16(4) CGST/SGST Act not pressed, petitioner given liberty to avail statutory remedy

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