Facts of the Case

The petitioner, M/S. Sangamesh Note Book Industries, represented by its proprietor Sadanand K. Javalagi (GSTIN 29BROPJ5328N1ZO), filed a writ petition before the Karnataka High Court, Dharwad Bench, questioning 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 a time limit for availing input tax credit), as violative of Articles 14, 19 and 300A of the Constitution. The petitioner also challenged a show cause notice dated 06.06.2023 issued under Section 73(5) of the KGST Act, 2017 (Reference No. CTO/AUDIT-2/DWD/GST/DRC-01A/23-24/B-71), proposing to deny an ITC claim on the ground of Section 16(4) and to levy interest under Section 50 of the Act.

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 constitutionally valid.
  2. Whether the impugned show cause notice denying ITC on the basis of Section 16(4) could be sustained.
  3. Whether the petitioner, having chosen not to press the constitutional challenge, should be relegated to the statutory remedy.

Petitioner's Arguments

  • Section 16(4) of the CGST/KGST Act and Rule 61(5) of the KGST Rules were arbitrary, unreasonable and discriminatory, violating Articles 14, 19 and 300A of the Constitution, and should either be struck down or read down as merely directory rather than mandatory.
  • The show cause notice proposing denial of ITC and levy of interest under Section 50 was consequently unsustainable.
  • At the hearing, however, the petitioner's counsel chose not to press the challenge to the constitutional validity of Section 16(4) and the associated Rule.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act read with Rule 61(5) had 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 and Others.
  • Similar time-limit provisions under the Tamil Nadu VAT Act had been upheld as constitutional by the Supreme Court in Jayam and Company vs Assistant Commissioner and ALD Automotive Private Limited vs Commercial Tax Officer.
  • Since the provision had already been upheld by co-ordinate High Courts following binding Supreme Court precedent, the constitutional challenge was liable to be rejected.

Court Order/Findings

  • Since the petitioner did not press the constitutional challenge or the alternative prayer to read down Section 16(4), the Court held it unnecessary to examine the constitutional validity of the provision.
  • Once the constitutional prayers were excluded, the Court held that the petitioner must approach the appellate authority under the CGST/KGST Act to challenge the impugned order and show cause notice, rather than have the writ court examine them on merits.
  • The writ petition was disposed of without expressing any opinion on the merits of the show cause notice, 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 any appeal or response to the notice.

Important Clarification

  • Where a petitioner does not press a constitutional challenge to Section 16(4) of the CGST/SGST Act — a provision already upheld by multiple High Courts as constitutionally valid — the writ court will not independently adjudicate the ITC time-limit denial and will relegate the matter to the statutory appellate process.
  • Time spent pursuing such a writ petition is excluded while computing the limitation period for filing a statutory appeal or replying to the show cause notice.

Sections Involved

  • Section 16(4) of the CGST/KGST Act, 2017 — prescribes the time limit within which input tax credit must be availed.
  • Rule 61(5) of the KGST Rules, 2017 — procedural rule connected with the time limit for availing ITC.
  • Section 73(5) of the KGST Act, 2017 — provision for issuing a show cause notice for tax not paid/short paid otherwise than by reason of fraud.
  • Section 50 of the KGST Act, 2017 — interest on delayed payment/wrongly availed credit.

Decision – In Favour of

Disposed of with directions; effectively in favour of the Department, since the constitutional challenge (not pressed) remained unadjudicated and the ITC denial notice was left intact, with the petitioner relegated to the statutory appellate remedy.

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. 104399 of 2023 (T-RES)
  • CNR: 2023:KHC-D:14039
  • Coram: Hon'ble Justice Anant Ramanath Hegde
  • Decision Date: 17.11.2023
  • Disposal Nature: Disposed of; constitutional challenge to Section 16(4) CGST/SGST Act not pressed, petitioner given liberty to avail statutory remedy under CGST/KGST Act

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