Facts of the Case

The petitioner, Devaraddi Agro Enterprises, a proprietorship represented by Shri M.H. Devaraddi (GSTIN 29ARWPD2864L1Z0), approached the High Court of Karnataka, Dharwad Bench, under Articles 226 and 227 of the Constitution. The petitioner challenged 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 prescribes the time limit for availing input tax credit, and also sought to quash a Summary of Show Cause Notice in Form GST DRC-01 dated 01.06.2023 and a Summary of Order in Form GST DRC-07 dated 06.06.2023, both issued for FY 2017-18 by the Assistant Commissioner of Commercial Taxes, Bagalkot. The matter was heard and disposed of on 11 December 2023 by Justice Anant Ramanath Hegde.

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017, read with Rule 61(5) of the KGST Rules, prescribing a time limit for claiming input tax credit, is unconstitutional as violative of Articles 14, 19 and 300A.
  2. Whether, in the alternative, the time limit under Section 16(4) should be read down as merely directory rather than mandatory.
  3. Whether the impugned show cause notice and demand order for FY 2017-18 were liable to be quashed.
  4. Whether the writ court should adjudicate these questions itself or relegate the petitioner to the statutory appellate remedy.

Petitioner's Arguments

  • Initially sought a declaration that 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, sought that the time limit for availing input tax credit under Section 16(4) be read down as procedural and directory rather than mandatory.
  • Sought quashing of the impugned Form GST DRC-07 summary order and Form GST DRC-01 summary show cause notice issued for FY 2017-18.
  • Ultimately, through counsel, chose not to press the challenge to the constitutional validity of Section 16(4) and the associated read-down prayer, placing that submission on record before the Court.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the CGST Rules already stood upheld in Thirumalakonda Plywoods v. The Assistant Commissioner (Andhra Pradesh High Court) and Gobinda Construction v. Union of India and Others (Patna High Court).
  • Similar time-limit provisions under the Tamil Nadu VAT Act had been upheld as constitutional 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.
  • Given this body of precedent, the constitutional challenge in the present writ petition deserved to be rejected.

Court Order/Findings

  • Since the petitioner did not press the prayer challenging the constitutional validity of Section 16(4), or the alternative prayer to read it down, the Court held it need not examine the constitutional validity of the provision.
  • Once the constitutional prayers were excluded, the Court held that the challenge to the impugned order and show cause notice had to be pursued before the Appellate Authority under the CGST Act and KGST Act, and the writ petition was disposed of without expressing anything on the merits of the orders or notices.
  • The petitioner was granted liberty to avail the statutory remedy available under the CGST Act and KGST Act in respect of the impugned order and notices.
  • The Court directed that if the petitioner pursued any such statutory remedy, the time spent in prosecuting the writ petition would be excluded while computing the limitation period for filing an appeal or responding to the notices.

Important Clarification

  • Where the constitutional validity of Section 16(4) has already been upheld by other High Courts and analogous provisions upheld by the Supreme Court, courts are disinclined to re-examine the question and instead relegate petitioners to statutory remedies against individual demand orders.
  • Petitioners who do not press a constitutional challenge are not without recourse — they retain the benefit of exclusion of time spent in the writ petition while computing limitation for a subsequent statutory appeal.

Sections Involved

  • Section 16(4) of the CGST/KGST Act, 2017 — prescribes the time limit within which input tax credit for a financial year may be availed.
  • Rule 61(5) of the Karnataka GST Rules, 2017 — procedural rule connected with furnishing of returns and availment of credit, challenged along with Section 16(4).
  • Articles 14, 19 and 300A of the Constitution of India — fundamental and constitutional rights invoked in challenging the time-limit provision.
  • Form GST DRC-01 and Form GST DRC-07 — the summary show cause notice and summary of demand order issued for FY 2017-18, challenged on merits.

Decision – In Favour of

The writ petition was disposed of with directions and without any finding on merits, in part in favour of the Assessee — the petitioner secured the benefit of exclusion of time spent in the writ petition for computing limitation before the Appellate Authority, but obtained no ruling on either the constitutional challenge (not pressed) or the merits of the demand.

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.105885 of 2023 (T-RES)
  • CNR: Not available on record
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 11 December 2023
  • Disposal Nature: Disposed of without expressing opinion on merits; petitioner relegated to appellate remedy

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