Facts of the Case

Shri Basavaraj Shivappa Rayapur, proprietor of M/s. Shri Devi Stone Crusher Industries, Gadag (GSTIN: 29AIUPR5893G1Z6), filed WRIT PETITION NO. 101526 OF 2023 (T-RES) before the High Court of Karnataka, 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 (as amended by Notification No.49/2019-Central Tax), which prescribes a time limit for availing input tax credit. He also sought to quash a GST audit report in FORM GST ADT-02 (No.CTO(AUDIT)/GDG/GST/ADT/2022-23/B-805 dated 12.01.2023) issued by the Commercial Tax Officer (Audit), Gadag, and impleaded the State of Karnataka, the Union of India, the GST Council, and the Principal Chief Commissioner of Central Tax as parties. The matter was heard by Justice Anant Ramanath Hegde on 17.11.2023.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017, read with Rule 61(5) of the KGST Rules, is unconstitutional as arbitrary, unreasonable and discriminatory under Articles 14, 19 and 300A.
  2. Whether the time limit for taking input tax credit under Section 16(4) should be read down as directory rather than mandatory.
  3. Whether the impugned FORM GST ADT-02 audit report should be quashed as arbitrary and oppressive.

Petitioner's Arguments

  • The petitioner contended that Section 16(4) of the CGST/SGST 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, the petitioner sought a reading down of Section 16(4) so that the time limit for availing input tax credit would be treated as procedural and directory rather than a mandatory bar.
  • The petitioner separately challenged the FORM GST ADT-02 audit report as unreasonable, arbitrary, oppressive, excessive and premeditated.
  • At the hearing, however, counsel for the petitioner submitted that he would not press the prayer challenging the constitutional validity of Section 16(4), nor the alternative prayer to read it down as directory.

Respondent's Arguments

  • Counsel for the respondents jointly submitted that 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 (W.P.No.24235/2022, Andhra Pradesh High Court) and in Gobinda Construction v. Union of India and Others (Civil Writ Jurisdiction Case No.9108/2021, Patna High Court).
  • It was further submitted that similar time-limit provisions under the Tamil Nadu Value Added Tax 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 (CT) (2019) 13 SCC 225.
  • The respondents therefore urged that the challenge to the constitutional validity of Section 16(4) ought to be rejected, following the settled position taken in these High Court and Supreme Court decisions.

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 did not need to examine the constitutional validity of these provisions.
  • The writ petition was disposed of without expressing anything on the merits of the impugned orders or show-cause notices, with the petitioner left to approach the appellate authority under the CGST Act and KGST Act, and to reply to or otherwise deal with the show-cause notices as provided under law.
  • The Court directed that if the petitioner avails such statutory remedy, the time spent in prosecuting the writ petition shall be excluded while computing the limitation period prescribed for filing an appeal or responding to the notices.

Important Clarification

  • The constitutional validity of Section 16(4) of the CGST/SGST Act (the ITC time-limit provision) has already been upheld by the Andhra Pradesh High Court in Thirumalakonda Plywoods and by the Patna High Court in Gobinda Construction, following Supreme Court precedent on analogous VAT time-limit provisions — a relevant reference point for any future constitutional challenge to Section 16(4).
  • Where a petitioner abandons a constitutional challenge at the threshold, courts will decline to examine the validity of the provision and instead relegate the party to the ordinary statutory appellate remedy, without expressing any view on the merits of the underlying orders.
  • Courts routinely direct exclusion of the time spent pursuing an unsuccessful or withdrawn writ petition while computing the limitation period for a subsequent statutory appeal, protecting a litigant's appellate remedy.

Sections Involved

  • Section 16(4) of the CGST/SGST Act, 2017 – prescribes the time limit within which input tax credit must be availed.
  • Rule 61(5) of the Karnataka GST Rules, 2017 (as amended by Notification No.49/2019-Central Tax) – procedural rule connected to the ITC time-limit dispute.
  • Articles 14, 19 and 300A of the Constitution of India – grounds on which the constitutional challenge was originally framed.
  • FORM GST ADT-02 – the statutory audit report format under which the impugned audit findings were communicated.

Decision – In Favour of

The writ petition was disposed of with the constitutional challenge unpressed and unexamined; this is not a merits victory for either side, but is more accurately described as disposed of with liberty to the Assessee to pursue the statutory appellate remedy, with the benefit of excluded limitation period.

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. 101526 OF 2023 (T-RES)
  • CNR: Not available on record
  • Coram: Justice Anant Ramanath Hegde
  • Decision Date: 17.11.2023
  • Disposal Nature: Disposed of (constitutional challenge not pressed; liberty to pursue statutory remedy)

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.