Facts of the Case

The petitioner, M/s. Mallikarjun Communication, a proprietorship represented by its proprietor Girimallappa Shrishail Kori, GSTIN 29BREPK4935L2Z9, Bagalkot, filed this writ petition before the Karnataka High Court, Dharwad Bench, challenging the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the Karnataka Goods and Services Tax Rules (introduced by Notification No. 49/2019 Central Tax dated 09.10.2019), as violative of Articles 14, 19 and 300A of the Constitution. In the alternative, the petitioner sought that the time limit for taking input tax credit under Section 16(4) be read down as directory rather than mandatory. The petitioner also sought quashing of an audit report dated 23.12.2022 and a Form GST DRC-01A intimation dated 31.03.2023 issued against it.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017 read with Rule 61(5) of the KGST Rules is unconstitutional as violative of Articles 14, 19 and 300A.
  2. Whether the audit report and Form GST DRC-01A issued against the petitioner should be quashed as arbitrary.
  3. Whether the petitioner should be relegated to the statutory appellate remedy once the constitutional challenge is not pressed.

Petitioner's Arguments

  • Section 16(4)'s time limit for availing ITC, read with Rule 61(5), was illegal, arbitrary and discriminatory, and ought to be struck down, or alternatively read down as directory rather than mandatory.
  • The audit report and the Form GST DRC-01A intimation were unreasonable, arbitrary, oppressive and excessive.
  • At the hearing, the petitioner's counsel chose not to press the constitutional challenge and the alternative "read down" prayer, placing that submission on record.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act 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.
  • Analogous time-limit provisions under the Tamil Nadu VAT Act had been upheld by the Supreme Court in Jayam and Company v. Assistant Commissioner and ALD Automotive Private Limited v. Commercial Tax Officer.
  • The petitioner had an adequate alternative statutory remedy to challenge the audit report and DRC-01A on merits.

Court Order/Findings

  • Since the petitioner did not press the constitutional challenge or the alternative read-down prayer, the Court did not examine the constitutional validity of Section 16(4) of the CGST/KGST Act or Rule 61(5) of the KGST Rules.
  • Once those prayers were excluded, the petitioner was directed to approach the appellate authority under the CGST/KGST Act to challenge the impugned order and show cause notices; the writ petition was disposed of without expressing anything on the merits of the audit report or the DRC-01A.
  • Liberty was granted to avail the statutory remedy, and the time spent in prosecuting the writ petition was directed to be excluded while computing limitation for filing the appeal or responding to the notices.

Important Clarification

Where a petitioner does not press a challenge to the constitutional validity of Section 16(4) of the CGST/SGST Act — a validity already upheld by other High Courts and supported by analogous Supreme Court rulings on time-limited input tax credit provisions — the writ court will decline to examine the underlying audit report or DRC-01A on merits, and will instead relegate the assessee to the statutory appellate remedy, while excluding the time spent in the writ petition from the limitation period for filing that appeal.

Sections Involved

  • Section 16(4), CGST/KGST Act, 2017 — prescribes the time limit within which input tax credit must be availed.
  • Rule 61(5), KGST Rules, 2017 — introduced by Notification No. 49/2019 Central Tax, relating to filing of returns and the manner of ITC availment.
  • Form GST DRC-01A — pre-show cause notice intimation of tax ascertained.

Decision – In Favour of

Disposed of without expressing anything on the merits, and hence not a clean win for either side — since the constitutional challenge was withdrawn and the audit report/DRC-01A were left undisturbed, the immediate practical outcome favours the Department, though the petitioner retains full liberty, and a limitation benefit, to pursue the statutory appellate remedy on merits.

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. 103640 of 2023 (T-RES)
  • CNR: 2023:KHC-D:13578
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 17 November 2023
  • Disposal Nature: Disposed of; petitioner directed to statutory appellate remedy

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.