Facts of the Case

The petitioner, M/S. M.A.R. Fabricators India Pvt. Ltd, represented by its director, moved the Karnataka High Court under Articles 226 and 227 questioning the constitutional validity of Section 16(4) of the Central/Karnataka Goods and Services Tax Act, 2017 read with Rule 61(5) and Section 164(3) of the corresponding Rules and Act, as violative of Articles 14, 19 and 300A of the Constitution. The petitioner also sought to quash an original order dated 05.07.2022 (OIO No. BEL/GST/000/DIVH/ASC/VM/06/2021-22) and consequential demand notices dated 03.08.2022 and 12.09.2022 issued under the CGST and KGST Acts and Rules, arising from rejection of belated GSTR-3B filings and the associated denial of input tax credit.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017 read with Rule 61(5) of the KGST Rules, 2017 and Section 164(3) is unconstitutional as violative of Articles 14, 19 and 300A.
  2. Whether, once the petitioner elected not to press the constitutional challenge, the writ court should still examine the validity of the impugned order and show-cause notices.
  3. What remedy remains available to the petitioner in respect of the impugned order and demand notices once the constitutional challenge is given up.

Petitioner's Arguments

  • The time limit prescribed under Section 16(4) for availing input tax credit should be read as directory and procedural rather than mandatory, given that rejection of belated GSTR-3B filings caused disproportionate hardship.
  • At the hearing, learned counsel for the petitioner ultimately submitted that the petitioner would not press its prayer challenging the constitutional validity of Section 16(4), Rule 61(5) and Section 164(3), or the alternative prayer to read down Section 16(4) as directory.

Respondent's Arguments

  • The constitutional validity of Section 16(4) CGST/SGST Act, 2017 read with Rule 61(5) has already been upheld by the Andhra Pradesh High Court in Thirumalakonda Plywoods v. The Assistant Commissioner (W.P. No. 24235/2022) and by the Patna High Court in Gobinda Construction v. Union of India and Others (CWJC No. 9108/2021).
  • Similar time-limit provisions under the Tamil Nadu Value Added Tax Act were held constitutional by the Supreme Court in Jayam and Company v. Assistant Commissioner (2016) 15 SCC 125 and ALD Automotive Private Limited v. Commercial Tax Officer (CT) and Others (2019) 13 SCC 225, and the same reasoning should govern the challenge to Section 16(4).

Court Order/Findings

  • Since the petitioner did not press the prayer challenging the constitutional validity, or seeking to read down, Section 16(4), Rule 61(5) and Section 164(3), the Court held it need not examine those questions.
  • Once the constitutional challenge was excluded from consideration, the Court held that the petitioner must approach the appellate authority provided under the CGST and KGST Acts to contest the impugned order, and must respond to the impugned show-cause notices as provided under law, without the writ court expressing any view on the merits of either.
  • The writ petition was disposed of without expressing anything on the merits of the impugned order or the show-cause notices.
  • The petitioner was granted liberty to avail statutory remedies, and the time spent 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 petitioner declines to press a constitutional challenge to a taxing provision at the hearing stage, the writ court will not independently examine that challenge on its own motion, and the petitioner is left to pursue the ordinary statutory remedies against the underlying demand.
  • The Supreme Court's rulings on analogous input-tax-credit time-limit provisions under state VAT laws (Jayam and Company; ALD Automotive) continue to be relied upon by the Revenue to defend the constitutionality of Section 16(4) CGST Act challenges before High Courts.
  • Time spent in prosecuting a writ petition that is ultimately relegated to a statutory remedy is liable to be excluded while computing the limitation period for filing the corresponding appeal or reply.

Sections Involved

  • Section 16(4), Central Goods and Services Tax Act, 2017 / Karnataka Goods and Services Tax Act, 2017 – Prescribes the time limit for availing input tax credit.
  • Rule 61(5), Karnataka Goods and Services Tax Rules, 2017 – Manner of furnishing returns in FORM GSTR-3B.
  • Section 164(3), Central/Karnataka Goods and Services Tax Act, 2017 – Rule-making power of the Government.
  • Section 107, Central Goods and Services Tax Act, 2017 – Statutory appellate remedy available to the petitioner going forward.

Decision – In Favour of

The disposal does not favour either side on the merits. It is more accurately described as disposed of without adjudication on merits, in view of the constitutional challenge not being pressed — the petitioner was relegated to the statutory appellate remedy against the order and show-cause notices, with the benefit of exclusion of time spent in the writ petition while computing limitation.

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. 104870 of 2022 (T-RES)
  • CNR: Not available on record
  • Coram: Hon'ble Mr Justice Anant Ramanath Hegde
  • Decision Date: 17.11.2023
  • Disposal Nature: Disposed of - constitutional challenge to Section 16(4) CGST/KGST Act not pressed; petitioner given liberty to pursue statutory appellate remedy

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