Facts of the Case

Shri Bhimappa, a civil contractor from Itagi, Gadag district (GSTIN: 29GNGPS9214G1ZI), filed a writ petition under Articles 226 and 227 of the Constitution before the Karnataka High Court, Dharwad Bench, questioning the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the KGST Rules, 2017 (introduced vide Notification No.49/2019-Central Tax), which prescribes a time limit for availing input tax credit. The petitioner also sought to quash the Form GST ADT-02 audit notice dated 14.09.2022 and Form GST DRC-01A notice dated 29.11.2022 issued by the Commercial Tax Officer (Audit-2), Gadag, alleging they were arbitrary, oppressive and premeditated. The respondents included the Department of Commercial Taxes, the State of Karnataka, the Union of India, the GST Council and the Principal Chief Commissioner of Central Tax. The matter was decided on 11.12.2023.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the KGST Rules, prescribing a time limit for availing input tax credit, is unconstitutional as being violative of Articles 14, 19 and 300A.
  2. Whether the impugned Form GST ADT-02 and DRC-01A notices issued to the petitioner were liable to be quashed.
  3. Whether the petitioner, having chosen not to press the constitutional challenge, should be relegated to the statutory remedy against the impugned notices.

Petitioner's Arguments

  • Section 16(4) of the CGST/SGST Act and Rule 61(5) of the KGST Rules impose an arbitrary, unreasonable and discriminatory time restriction on availing input tax credit, violating Articles 14, 19 and 300A.
  • In the alternative, the time limit ought to be read down as merely procedural and directory rather than mandatory.
  • The Form GST ADT-02 audit notice and the Form GST DRC-01A notice issued against the petitioner were unreasonable, arbitrary, oppressive, excessive and premeditated, and deserved to be quashed.
  • At the hearing, the petitioner's counsel elected not to press the constitutional challenge or the alternative read-down prayer.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the CGST Rules has already been upheld by the Andhra Pradesh High Court in Thirumalakonda Plywoods vs The Assistant Commissioner and by the Patna High Court in Gobinda Construction vs Union of India.
  • Analogous time-limit provisions under the Tamil Nadu Value Added Tax Act were upheld by the Supreme Court in Jayam and Company vs Assistant Commissioner (2016) 15 SCC 125 and ALD Automotive Private Limited vs Commercial Tax Officer (2019) 13 SCC 225.
  • In view of this settled position, the challenge to constitutional validity deserved outright rejection.

Court Order/Findings

  • Since the petitioner's counsel did not press the prayer challenging constitutional validity, or the alternative prayer to read down Section 16(4), the Court held it need not examine the vires question.
  • With the constitutional challenge excluded, only the validity of the impugned order and notices remained, for which the petitioner has a remedy before the Appellate Authority under the CGST Act and KGST Act.
  • The writ petition was disposed of without expressing anything on the merits of the impugned order or show-cause notices, with liberty to the petitioner to avail the statutory remedy.
  • The Court directed that the time spent in prosecuting the writ petition be excluded while computing limitation for filing an appeal or responding to the impugned notices.

Important Clarification

  • Section 16(4)'s time-bar on availing input tax credit has been upheld as constitutional by the Andhra Pradesh and Patna High Courts, drawing support from the Supreme Court's VAT-era rulings in Jayam and Company and ALD Automotive — relevant precedent for anyone weighing a fresh constitutional challenge.
  • Where a petitioner withdraws a vires challenge, courts typically relegate the party to the statutory appellate forum without commenting on the underlying merits of the notices or orders.
  • Time spent prosecuting an unsuccessful writ petition can be excluded while computing limitation for the subsequent statutory appeal or reply.

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), CGST/KGST Rules, 2017 – procedural rule concerning furnishing of returns, introduced vide Notification No.49/2019-Central Tax, tied to the time limit for availing credit.
  • Articles 14, 19 and 300A, Constitution of India – constitutional grounds (equality, trade freedom and property rights) invoked against the time-bar.

Decision – In Favour of

Disposed of without expressing any opinion on merits; the petitioner was relegated to the appellate remedy. This is not a merits win for either side — the petitioner withdrew the constitutional challenge, and the Court left the validity of the impugned notices open for the statutory appellate authority, while granting the benefit of limitation exclusion for time spent in the writ proceedings.

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.100168 of 2023 (T-RES)
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice Anant Ramanath Hegde
  • Decision Date: 11.12.2023
  • Disposal Nature: Disposed of without expressing opinion on merits; petitioner relegated to appellate remedy

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