Facts of the Case

The petitioner, M/s Rahul Agro Industries, a partnership represented by its partner Rahul M. Jadhav, holding GSTIN 29AANFR3244C1Z6 and based at Jamkhandi, filed this writ petition 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 Karnataka GST Rules, 2017, insofar as it prescribes a time limit for availing input tax credit. The petitioner also challenged a pre-intimation in Form GST DRC-01A dated 03.10.2022 and a show cause notice in Form GST DRC-01 dated 21.11.2022, both issued by the Assistant Commissioner of Commercial Taxes, LGSTO 430, Jamkhandi, as arbitrary and violative of Articles 14, 19 and 300A of the Constitution of India. The matter was heard and disposed of by Justice Anant Ramanath Hegde on 11.12.2023.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017 and Rule 61(5) of the KGST Rules, prescribing a time limit for availing input tax credit, were unconstitutional as violative of Articles 14, 19 and 300A.
  2. In the alternative, whether the time limit under Section 16(4) should be read down as directory rather than mandatory.
  3. Whether the impugned DRC-01A pre-intimation and DRC-01 show cause notice were liable to be quashed as arbitrary once the constitutional challenge was not pressed.

Petitioner's Arguments

  • Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the KGST Rules, which time-limits the availing of input tax credit, is illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution.
  • In the alternative, the time limit for taking input tax credit under Section 16(4) should be read down and treated as procedural and directory rather than a mandatory bar.
  • The DRC-01A pre-intimation dated 03.10.2022 and the DRC-01 show cause notice dated 21.11.2022 were unreasonable, arbitrary, oppressive, excessive and premeditated, and should be quashed.
  • At the hearing, the petitioner's counsel chose not to press the constitutional challenge or the alternative prayer to read down Section 16(4), placing that submission on record.

Respondent's Arguments

  • The constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the KGST Rules already stood 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.
  • Analogous time-limit provisions under the Tamil Nadu Value Added Tax Act had been upheld as constitutional 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.
  • Given these binding precedents upholding the provision, the challenge to constitutional validity should 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 challenge is withdrawn, the writ court will not examine the merits of the impugned notice or order and will relegate the petitioner to the statutory appellate remedy under the CGST/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 under the CGST/KGST Act.
  • The Court further directed that the time spent in prosecuting the writ petition be excluded while computing the limitation, if any, prescribed for filing an appeal or responding to the notices.

Important Clarification

  • Where a writ petition is entertained principally because it raises a constitutional challenge to Section 16(4) of the CGST/SGST Act, and that challenge is subsequently not pressed, the High Court will decline to examine the underlying tax notice or order on merits and will direct the petitioner to the statutory appellate forum, while excluding the time spent in the writ proceedings from the limitation period for that appeal.

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), KGST Rules, 2017 - procedural rule connected with the manner and timelines for furnishing returns and availing input tax credit.
  • Articles 14, 19 and 300A, Constitution of India - grounds relied upon (equality, freedom to carry on business, and right to property) in the constitutional challenge that was ultimately not pressed.

Decision - In Favour of

The decision is disposed of with directions, without a finding on merits for either side. The writ petition was disposed of without examining the constitutional validity of Section 16(4) or the merits of the impugned notices, leaving the petitioner at liberty to pursue the statutory remedy under the CGST/KGST Act.

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. 102552 OF 2023 (T-RES)
  • CNR: Not available on record
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 11 December 2023
  • Disposal Nature: Disposed of (constitutional challenge not pressed; liberty to pursue statutory remedy under CGST/KGST Act)

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