Facts of the Case

The petitioner, Shri Malleshappa, a civil contractor from Hole Alur, Gadag District, Karnataka, filed a writ petition challenging the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the Karnataka GST Rules, 2017 (as amended by Notification No. 49/2019-Central Tax), contending that the provision, which imposes a time limit for availing input tax credit, is illegal, unreasonable, arbitrary and discriminatory and violates Articles 14, 19 and 300A of the Constitution. In the alternative, the petitioner sought that the provision be read down as directory rather than mandatory. The petitioner also challenged an audit observation dated 18.08.2022 (No. CTO(Audit)/GDG/GST/ADT/2022-23/366) and a consequential Form GST DRC-01A notice dated 13.12.2022 issued by the Commercial Tax Officer (Audit), Gadag. The Dharwad Bench of the Karnataka High Court had entertained the writ petition specifically because the constitutional validity of the statutory provisions was under challenge.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017, read with Rule 61(5) of the KGST Rules, is constitutionally valid.
  2. Whether, once the constitutional challenge was not pressed, the Court should examine the impugned audit observation and DRC-01A notice on their own merits or relegate the petitioner to statutory remedies.

Petitioner's Arguments

  • The time limit under Section 16(4) is illegal, unreasonable, arbitrary and discriminatory, and should be struck down or, alternatively, read down as merely directory rather than mandatory.
  • The audit observation and the Form GST DRC-01A notice were arbitrary, oppressive, excessive and premeditated.
  • Ultimately, the petitioner's counsel submitted, on instructions, that the challenge to constitutional validity and the alternative prayer to read down the provision would not be pressed further.

Respondent's Arguments

  • Relied on the Andhra Pradesh High Court's decision in Thirumalakonda Plywoods v. Assistant Commissioner and the Patna High Court's decision in Gobinda Construction v. Union of India, both upholding the constitutional validity of Section 16(4)/pari materia provisions.
  • Relied on the Supreme Court's rulings in Jayam and Company v. Assistant Commissioner and ALD Automotive Private Limited v. Commercial Tax Officer, upholding similarly structured input tax credit time limits under State VAT legislation.
  • Submitted that, in light of these binding precedents, the constitutional challenge should be rejected.

Court Order/Findings

  • Recording that the petitioner would not press the challenge to constitutional validity or the alternative prayer to read down the provision, the Court held it need not examine the validity question at all.
  • Since the writ petition was entertained only because of the constitutional challenge, once that challenge was withdrawn, the petitioner was directed to pursue the appellate authority under the CGST/KGST Act for the remaining grievances against the audit observation and notice.
  • The writ petition was disposed of without expressing anything on the merits of the orders passed or the show cause notices issued, with time spent in the writ proceedings excluded from limitation for any statutory remedy.

Important Clarification

Once a petitioner elects not to press a constitutional challenge to a GST provision that was the sole basis for the High Court entertaining the writ petition in the first place, the Court will decline to examine the validity of the provision and will relegate the assessee to ordinary statutory remedies, while protecting the assessee by excluding the time spent in the writ petition from the limitation period for those remedies.

Sections Involved

  • Section 16(4), CGST Act, 2017 - time limit for availing input tax credit.
  • Rule 61(5), KGST Rules, 2017 - provisions linked to the ITC time-limit challenge.
  • Section 107, CGST Act, 2017 - appeal to the Appellate Authority.

Decision – In Favour of

This is a thin, procedural disposal. Since the constitutional challenge was not pressed, the writ petition was disposed of without expressing anything on the merits of the audit observation or the DRC-01A notice. Neither the Assessee nor the Department obtained a substantive ruling; the petitioner was simply left to pursue the ordinary appellate remedy, with the litigation time protected for limitation purposes.

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. 100169 of 2023 (T-RES)
  • CNR: 2023:KHC-D:13475
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 17 November 2023
  • Disposal Nature: Disposed of; petitioner directed to statutory appellate remedy

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