Facts of the Case

The petitioner, M/S. Umeshwar Agency (GSTIN-29ACBPG6176A1ZV), filed a writ petition before the High Court of Karnataka, Dharwad Bench, questioning the constitutional validity of Section 16(4) of the Central Goods and Services Tax Act, 2017 and the corresponding Karnataka Goods and Services Tax Act, 2017 (the provision prescribing a time limit for availing input tax credit), read with Rule 61(5) of the KGST Rules, 2017 and Notification No. 49/2019-Central Tax. In the alternative, the petitioner sought a reading down of Section 16(4) as merely procedural and directory. The petitioner also challenged an assessment order dated 07.04.2022 issued by the Assistant Commissioner, Central Tax and Central Excise, Hubballi Division. During the hearing, however, the petitioner's counsel elected not to press the constitutional challenge, in view of judgments of other High Courts upholding the validity of Section 16(4). The writ petition had originally been entertained by the Court precisely because a constitutional challenge to a statutory provision was involved, since ordinarily a taxpayer aggrieved by an assessment order under the CGST/KGST Act is expected to first exhaust the statutory appellate remedy rather than approach the High Court directly under Article 226.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017 and Rule 61(5) of the KGST Rules, 2017 were constitutionally valid.
  2. Whether, upon the constitutional challenge not being pressed, the petitioner could still assail the impugned assessment order and show-cause notices in the same writ petition.

Petitioner's Arguments

  • Initially, the petitioner contended that Section 16(4) of the CGST/SGST Act, prescribing a time limit for availing input tax credit, was illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution.
  • At the hearing, however, the petitioner's counsel submitted that the prayer challenging the constitutional validity of Section 16(4) and the alternative prayer to read it down as directory would not be pressed.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) had already been upheld in Thirumalakonda Plywoods v. The Assistant Commissioner (Andhra Pradesh High Court) and Gobinda Construction v. Union of India (Patna High Court).
  • 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 Private Limited v. Commercial Tax Officer (2019) 13 SCC 225.

Court Order/Findings

  • Since the constitutional challenge was not pressed, the Court held it need not examine the validity of Section 16(4) of the CGST/SGST Act or Rule 61(5) of the KGST Rules.
  • The Court held that once the constitutional challenge is excluded, the petitioner must avail the statutory appellate remedy under the CGST/KGST Act to challenge the impugned assessment order and show-cause notices, and the writ petition was disposed of without expressing any view on the merits of those orders.
  • Liberty was granted to the petitioner to pursue such statutory remedy, with a direction that the time spent in prosecuting the writ petition be excluded while computing limitation for filing an appeal or responding to the notices.
  • The petition was accordingly disposed of, with nothing expressed on the merits of the claim.

Important Clarification

Where a taxpayer does not press a constitutional challenge to Section 16(4) of the CGST/SGST Act, the High Court will relegate the taxpayer to the statutory appellate remedy for the underlying assessment order, while ensuring the time spent litigating the writ petition is excluded from the limitation period for filing the appeal.

Sections Involved

  • Central Goods and Services Tax Act, 2017 / Karnataka Goods and Services Tax Act, 2017 — Section 16(4) (time limit for availing input tax credit).
  • Karnataka Goods and Services Tax Rules, 2017 — Rule 61(5).

Decision – In Favour of

The outcome is largely in favour of the Department on the constitutional question, since the challenge was not pressed and Section 16(4) remains operative; however, the petitioner retains an intact right to contest the assessment order on merits in a statutory appeal, with limitation protection.

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. 101833 of 2022
  • CNR: 2023:KHC-D:13401
  • Coram: The Hon'ble Mr Justice Anant Ramanath Hegde
  • Decision Date: 17.11.2023
  • Disposal Nature: Writ disposed of; constitutional challenge not pressed, liberty to pursue statutory appeal

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