Facts of the Case

The petitioner, Shashi Electricals, a proprietary concern represented by its proprietor Shashidar S/o Mahalingappa Nakati and holding GSTIN 29ACGPN5131R1ZZ, filed a writ petition before the Dharwad Bench of the Karnataka High Court 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, and Notification No.49/2019-Central Tax, on the ground that the time-limit prescribed for availing input tax credit was arbitrary, discriminatory and violative of Articles 14, 19 and 300A of the Constitution. In the alternative, the petitioner sought a reading down of Section 16(4) to treat the time-limit for availing ITC as merely procedural and directory. The petitioner also challenged a show-cause notice bearing No. ACCT/LGSTO-430/BGV/21-22/B-629 dated 03.01.2022 issued by the Assistant Commissioner of Commercial Taxes, LGSTO-430, Jamkhandi, Bagalkot. Respondents included the Assistant Commissioner of Commercial Taxes, the State of Karnataka, the Union of India, the GST Council and the Principal Chief Commissioner of Central Tax.

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.
  2. Whether the time-limit for availing input tax credit under Section 16(4) could be read down as directory rather than mandatory.
  3. Whether the impugned show-cause notice, once the constitutional challenge is given up, could be examined on merits in writ jurisdiction or must go before the statutory appellate authority.

Petitioner's Arguments

  • Section 16(4) and Rule 61(5), by fixing a rigid time-limit for availing ITC, operate arbitrarily and discriminatorily, and deserve to be struck down as unconstitutional.
  • In the alternative, the provision ought to be read down so that the time-limit for taking ITC is treated as procedural and directory, not a hard bar to a substantive right.
  • At the hearing, however, the petitioner's counsel chose not to press the challenge to constitutional validity or the alternative prayer for reading down Section 16(4), placing this submission on record.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) already stands 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 were upheld as constitutional by the Supreme Court in Jayam and Company v. Assistant Commissioner and in ALD Automotive Private Limited v. Commercial Tax Officer (CT).
  • Given these precedents, the challenge to Section 16(4) deserved to be rejected outright.

Court Order/Findings

  • Since the petitioner did not press the constitutional challenge or the alternative reading-down prayer, the Court found it unnecessary to examine the validity of Section 16(4) or Rule 61(5) on merits.
  • Once those prayers were excluded, only the validity of the impugned order and show-cause notice remained, for which the petitioner has an efficacious statutory remedy under the CGST and KGST Acts.
  • The writ petition was disposed of without expressing any opinion on the merits of the orders or the show-cause notice.
  • The petitioner was granted liberty to avail the statutory remedy, i.e., to respond to the show-cause notice or file an appeal, as applicable.
  • The time spent in prosecuting the writ petition was directed to be excluded while computing limitation for filing any appeal or response to the impugned notice.

Important Clarification

Where a petitioner declines to press a constitutional challenge to Section 16(4) of the CGST/SGST Act, the writ court will relegate the assessee to the statutory appellate/adjudicatory remedy without commenting on the merits of the underlying order or notice, while protecting the assessee by excluding the time spent in the writ proceeding from the limitation period for the alternate remedy.

Sections Involved

  • Section 16(4), CGST/SGST Act, 2017 — prescribes the time-limit within which input tax credit for a financial year must be availed.
  • Rule 61(5), Karnataka GST Rules, 2017 — procedural rule connected with furnishing of returns relevant to the ITC time-limit dispute.
  • Article 226/227, Constitution of India — writ jurisdiction invoked for the constitutional challenge and against the impugned notice.

Decision – In Favour of

This is a procedural disposal with no finding on merits either way. The constitutional challenge was not decided as it was not pressed, and the petitioner was simply relegated to the statutory remedy with the limitation period protected — a neutral outcome, not a substantive win for either the Assessee or the Department.

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. 102606 of 2022 (T-RES)
  • CNR: 2023:KHC-D:13402
  • Coram: Hon'ble Mr. Justice Anant Ramanath Hegde
  • Decision Date: 17-11-2023
  • Disposal Nature: Disposed of; petitioner directed to statutory appellate remedy

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