Facts of the Case

The petitioner, Shri Rahimansab, a PWD contractor from Koppal, Karnataka, challenged the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the Karnataka GST Rules, as well as a show-cause notice in Form GST DRC-01 dated 12.05.2022 and a further notice dated 06.10.2022 issued by the Assistant Commissioner of Commercial Taxes, LGSTO-510, Koppal, disputing input tax credit availed beyond the time limit prescribed under Section 16(4). The writ petition, filed before the Dharwad Bench of the Karnataka High Court, was entertained principally because the constitutional validity of the provision was under challenge, that question falling outside the statutory appellate remedy otherwise available.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the KGST Rules is unconstitutional as violative of Articles 14, 19 and 300A of the Constitution.
  2. Whether the time limit for availing input tax credit under Section 16(4) could alternatively be read down as merely directory rather than mandatory.
  3. Whether the impugned show-cause notice and demand notice, once the constitutional challenge was not pressed, could still be examined on merits in writ jurisdiction.

Petitioner's Arguments

  • Section 16(4) of the CGST/SGST Act, read with Rule 61(5) of the KGST Rules and Notification No.49/2019-Central Tax, was illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution.
  • In the alternative, the time limit for taking input tax credit under Section 16(4) ought to be read down as procedural and directory rather than mandatory.
  • The impugned show-cause notice in Form GST DRC-01 and the subsequent notice were unreasonable, arbitrary, oppressive, excessive and premeditated.
  • At hearing, however, counsel for the petitioner submitted that the challenge to constitutional validity, and the alternative prayer to read down Section 16(4), would not be pressed.

Respondent's Arguments

  • The constitutional validity of Section 16(4) CGST/SGST Act read with Rule 61(5) of the CGST Rules already stood upheld in Thirumalakonda Plywoods v. Assistant Commissioner (Andhra Pradesh High Court, WP No. 24235/2022) and Gobinda Construction v. Union of India (Patna High Court, CWJC No. 9108/2021).
  • Similar time-limit provisions under the Tamil Nadu VAT Act had been upheld by the Supreme Court in Jayam and Company v. Assistant Commissioner, (2016) 15 SCC 125, and ALD Automotive Pvt. Ltd. v. Commercial Tax Officer, (2019) 13 SCC 225.
  • Given these binding precedents, the constitutional challenge in the present petition ought to be rejected.

Court Order/Findings

  • Since the petitioner did not press the challenge to constitutional validity or the alternative prayer to read down Section 16(4), the Court held it need not examine the constitutional validity of the provision.
  • Once those prayers stood excluded, the Court held that the remaining challenge to the impugned order and show-cause notices had to be pursued before the appellate authority under the CGST Act and KGST Act, and any reply to the show-cause notices had to be filed as provided under law.
  • The writ petition was disposed of without expressing anything on the merits of the orders passed or show-cause notices issued.
  • Liberty was granted to the petitioner to avail statutory remedies, with the time spent prosecuting the writ petition to be excluded while computing any limitation for filing an appeal or responding to the notices.

Important Clarification

  • A constitutional challenge to Section 16(4) CGST/SGST Act, once not pressed in light of contrary High Court and Supreme Court precedent, leaves the taxpayer to pursue the ordinary statutory appellate remedy against the underlying demand.
  • Time spent in bona fide prosecution of a writ petition challenging a GST order can be excluded while computing limitation for a subsequent statutory appeal or reply to a show-cause notice.

Sections Involved

  • Section 16(4), CGST Act, 2017 and corresponding SGST provision — prescribes the time limit for availing input tax credit.
  • Rule 61(5), Karnataka GST Rules, 2017 — procedural rule linked to the ITC time-limit provision.
  • Notification No. 49/2019-Central Tax — notification referenced in the challenge to Rule 61(5).
  • Articles 14, 19 and 300A, Constitution of India — grounds of challenge invoking equality, freedom of trade and property rights.

Decision – In Favour of

This is a disposal with liberty and no finding on merits, and cannot be characterised as a clean win for either side. The constitutional challenge was not pressed in view of adverse precedent, and the petitioner was left to pursue the ordinary appellate remedy against the underlying ITC demand, with limitation benefit for time spent in the writ proceedings.

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.: Writ Petition No. 104529 of 2022 (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, liberty to avail statutory remedy

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