Facts of the Case

The petitioner, M/S. Holebasaweshwar Agro Kendra, represented by its proprietor Shri Manjunath S/o. Shivappa Dhupad (GSTIN: 29AJQPD7649R1Z1), filed Writ Petition No. 104381 of 2022 (T-RES) before the High Court of Karnataka, Dharwad Bench, against the Commercial Tax Officers, Audit-2, Bagalkot, the State of Karnataka, the Union of India, the GST Council and the Principal Chief Commissioner of Central Tax. 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, being the provisions prescribing a time limit for availing input tax credit, and also sought to quash a consequential demand order dated 20.09.2022 raising liability under Section 73(5) of the Act (Reference No. 214019907).

Issues Involved

  1. Whether Section 16(4) of the CGST/KGST Act, 2017, and Rule 61(5) of the KGST Rules, 2017 (the time limit for availing input tax credit) are constitutionally valid or should be read down as merely directory.
  2. Whether the consequential demand order dated 20.09.2022 under Section 73(5) is liable to be quashed if the underlying provision is struck down or read down.
  3. Whether the petitioner should be relegated to the statutory appellate remedy once the constitutional challenge is not pressed.

Petitioner's Arguments

  • The petitioner originally sought a declaration that Section 16(4) of the CGST/KGST Act, 2017, and Rule 61(5) of the KGST Rules, 2017, were illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution, or in the alternative sought that the time limit for availing ITC be read down as merely procedural/directory.
  • At the hearing, however, the petitioner's counsel chose not to press the challenge to constitutional validity or the alternative prayer to read down Section 16(4), and placed that 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, 2017, 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 and Others.
  • The respondents further relied on the Supreme Court's rulings in Jayam and Company v. Assistant Commissioner (2016) 15 SCC 125 and ALD Automotive Private Limited v. Commercial Tax Officer (CT) (2019) 13 SCC 225, upholding similar time-limit provisions under the Tamil Nadu VAT Act, to argue that the challenge to Section 16(4) ought to be rejected.

Court Order/Findings

  • Since the petitioner did not press the prayer challenging constitutional validity or seeking to read down Section 16(4)/Rule 61(5), the Court held it need not examine the constitutional validity of these provisions, and confined itself to observing that the petitioner must avail the statutory appellate remedy under the CGST/KGST Act to challenge the impugned order and show-cause notices.
  • Operative direction: the writ petition was disposed of without expressing any opinion on the merits of the orders passed or notices issued, with liberty to the petitioner to pursue the statutory appellate remedy.
  • Liberty reserved: the time spent in prosecuting the writ petition was directed to be excluded while computing limitation for filing any appeal or responding to the notices; the pending interim applications (I.A. Nos. 1 and 2 of 2022) were dismissed as not surviving.

Important Clarification

  • Where a petitioner chooses not to press a constitutional challenge to Section 16(4)/Rule 61(5) of the CGST/KGST Act (the ITC time-limit provisions), courts will simply relegate the party to the statutory appellate remedy without independently ruling on validity - leaving the constitutional question open in that case, even though other High Courts (Andhra Pradesh, Patna) have already upheld the provision.
  • Time spent pursuing such a writ petition is typically excluded while computing the limitation period for filing the statutory appeal, cushioning the petitioner against losing appellate rights on account of the writ litigation.

Sections Involved

  • Section 16(4), Central/Karnataka Goods and Services Tax Act, 2017 - prescribes the time limit within which input tax credit must be availed; its constitutional validity was originally under challenge.
  • Rule 61(5), Karnataka Goods and Services Tax Rules, 2017 - procedural rule linked to the time limit for availing ITC, also under challenge.
  • Section 73(5), Central/Karnataka Goods and Services Tax Act, 2017 - self-ascertained tax liability determination provision, under which the impugned demand order was issued.

Decision – In Favour of

Disposed of with directions, without a merits finding in favour of either side - the constitutional challenge was not pressed and no view was expressed on the underlying demand; the petitioner was relegated to the statutory appellate remedy, with the benefit of exclusion of time for limitation purposes.

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. 104381 OF 2022 (T-RES)
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice Anant Ramanath Hegde
  • Decision Date: 17.11.2023
  • Disposal Nature: Disposed - constitutional challenge not pressed, liberty to pursue statutory appellate remedy

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