Facts of the Case

The petitioner, Shree Vijay Laxmi Enterprises, a proprietorship represented by Smt. Bhumika Rohit Agarwal, filed this writ petition under Articles 226 and 227 challenging the constitutional validity of Section 16(4) of the CGST/KGST Act, 2017 read with Rule 61(5) of the Karnataka GST Rules, 2017, which prescribe the time limit for availing input tax credit. The petitioner sought a declaration that these provisions were arbitrary and discriminatory under Articles 14, 19 and 300A of the Constitution, or alternatively that the time limit be read down as directory. The petitioner also sought to quash an adjudication order bearing No. 157042733 dated 29 June 2022 passed by the Assistant Commissioner of Commercial Taxes (Audit-7), Belagavi (Respondent No.1), and impugned connected show-cause notices.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017, and Rule 61(5) of the KGST Rules, are constitutionally valid or liable to be read down as directory rather than mandatory.
  2. Whether the impugned adjudication order dated 29 June 2022 and connected show-cause notices could be examined on merits once the constitutional challenge was given up.
  3. What remedy remained available to the petitioner once the constitutional challenge was not pressed.

Petitioner's Arguments

  • Initially, the petitioner contended that Section 16(4) of the CGST/KGST Act and Rule 61(5) of the KGST Rules were illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution, and should be struck down or read down so that the time limit for taking input tax credit is treated as procedural and directory rather than mandatory.
  • The petitioner also sought quashing of the adjudication order dated 29 June 2022 as unreasonable, arbitrary, oppressive, excessive and premeditated.
  • At hearing, however, the petitioner's counsel chose not to press the constitutional challenge or the alternative prayer to read down Section 16(4), placing this submission on record.

Respondent's Arguments

  • Counsel for the respondents jointly submitted that the constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) had already been upheld in Thirumalakonda Plywoods vs The Assistant Commissioner (Andhra Pradesh High Court) and Gobinda Construction vs Union of India (Patna High Court).
  • They further relied on the Supreme Court's rulings in Jayam and Company vs Assistant Commissioner (2016) and ALD Automotive Private Limited vs Commercial Tax Officer (2019), which upheld similar time-limit provisions under the Tamil Nadu VAT Act, and argued the present challenge should also be rejected.

Court Order/Findings

  • Since the petitioner did not press the constitutional challenge or the alternative reading-down prayer, the Court held it need not examine the constitutional validity of Section 16(4) or Rule 61(5).
  • Once the constitutional prayers were excluded, the petitioner was required to avail the statutory appellate remedy under the CGST and KGST Acts against the impugned adjudication order, and to respond to any show-cause notices through the measures provided under law.
  • The writ petition was disposed of without expressing any opinion on the merits of the orders passed or show-cause notices issued.
  • The petitioner was granted liberty to avail the statutory remedy, with the time spent prosecuting the writ petition excluded while computing limitation for filing an appeal or responding to notices.

Important Clarification

  • Where a petitioner does not press a constitutional challenge to Section 16(4) of the CGST/SGST Act, the writ court will relegate the matter to the statutory appellate remedy without examining the underlying assessment on merits.
  • Time spent pursuing such a writ petition is liable to be excluded in computing the limitation period for filing a statutory appeal or replying to a show-cause notice — a useful protection for taxpayers who withdraw a constitutional challenge mid-litigation.
  • The validity of Section 16(4) time limits for ITC has already been upheld by the Andhra Pradesh and Patna High Courts, following Supreme Court precedent on analogous VAT provisions.

Sections Involved

  • Section 16(4), Central/Karnataka Goods and Services Tax Act, 2017 — prescribes the time limit for availing input tax credit.
  • Rule 61(5), Karnataka Goods and Services Tax Rules, 2017 — procedural rule connected with the manner of filing returns and availing ITC within the prescribed time.
  • Articles 14, 19 and 300A, Constitution of India — grounds on which the provisions were originally challenged as unconstitutional.

Decision – In Favour of

Disposed of without a decision on merits — neither squarely in favour of the Assessee nor the Department. The constitutional challenge was not pressed and therefore not examined; the petitioner was relegated to the statutory appellate remedy, with the benefit of exclusion of time spent in the writ petition.

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. 104871 of 2022
  • CNR: Not available on record (Neutral Citation: 2023:KHC-D:13473)
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: November 17, 2023
  • Disposal Nature: Disposed of without going into merits — petitioner relegated to statutory GST appellate remedy

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