Facts of the Case

The petitioner, Smt. Vijayalakshmi, proprietor of M/s Gayatri Irrigations, Jamkhandi, filed Writ Petition No.100467 of 2023 (T-RES) before the Dharwad Bench of the High Court of Karnataka challenging the constitutional validity of Section 16(4) of the CGST/KGST Act, 2017 read with Rule 61(5) of the KGST Rules, 2017, which prescribes a time limit for availing input tax credit. She also sought to read down Section 16(4) as merely procedural and directory, challenged Rule 61(5) as introduced by Notification No.49/2019-Central Tax, and sought to quash a pre-intimation notice bearing No. ACCT/LGSTO-430/JKD/DRC01A/22 dated 3rd October 2022 issued by the Assistant Commissioner of Commercial Taxes, Jamkhandi. The matter was heard on 11th December 2023 by a Single Judge, along with a connected writ petition raising an identical constitutional challenge.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017, prescribing a time limit for claiming input tax credit, is unconstitutional as violative of Articles 14, 19 and 300A.
  2. Whether the time limit under Section 16(4) could alternatively be read down as procedural and directory rather than mandatory.
  3. Whether the impugned DRC-01A pre-intimation notice was liable to be quashed as arbitrary and premature.

Petitioner's Arguments

  • Section 16(4) of the CGST/KGST Act and Rule 61(5) of the KGST Rules were illegal, unreasonable, arbitrary and discriminatory, and liable to be struck down as violative of 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 a mandatory forfeiture provision.
  • The DRC-01A intimation notice dated 3rd October 2022 was unreasonable, arbitrary, oppressive, excessive and premeditated.

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.
  • 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, and the challenge deserved rejection on the same reasoning.

Court Order/Findings

  • Faced with the respondents' reliance on the Andhra Pradesh and Patna High Court precedents upholding Section 16(4), the petitioner's counsel elected not to press the constitutional challenge or the alternative "read down" prayer, and this submission was placed on record.
  • The Court held that once the constitutional challenge was not pressed, it need not examine the validity of Section 16(4), and the petitioner would have to approach the Appellate Authority to challenge the impugned order and notice on their own merits.
  • The writ petition was disposed of without expressing any opinion on the merits of the impugned order or show-cause notices.
  • Liberty was granted to the petitioner to pursue the statutory remedy under the CGST/KGST Act, with the time spent in the writ petition to be excluded while computing limitation for any such remedy.

Important Clarification

Where a petitioner withdraws or does not press a constitutional challenge to Section 16(4) of the CGST Act in light of coordinate High Court precedent upholding the provision, the writ court will decline to examine the challenge further and will relegate the taxpayer to the ordinary statutory appellate remedy, while excluding the litigation period from limitation.

Sections Involved

  • Section 16(4) of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017.
  • Rule 61(5) of the Karnataka Goods and Services Tax Rules, 2017, as amended by Notification No.49/2019-Central Tax.
  • Articles 14, 19 and 300A of the Constitution of India.

Decision – In Favour of

Neither side secured a clean win. The petitioner's constitutional challenge was not pressed and stood abandoned in the face of adverse High Court precedent, effectively a setback for the Assessee on that front, while the Court declined to rule on the merits of the underlying notice at all, leaving the substantive dispute open for the statutory appellate process.

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.100467 of 2023 (T-RES)
  • CNR: 2023:KHC-D:14493
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 11-12-2023
  • Disposal Nature: Writ petition disposed of without expressing opinion on merits; liberty to pursue statutory remedy

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