Facts of the Case

M/s. RSN Hydro Solutions, a partnership firm based in Gadag, Karnataka, registered under GSTIN 29AAJFR44901ZO and represented by its partner Shri Eknathgouda R Nagnur, filed a writ petition before the High Court of Karnataka, Dharwad Bench, under Articles 226 and 227 of the Constitution of India. The petitioner challenged the constitutional validity of Section 16(4) of the CGST Act/SGST Act, 2017, which prescribes the outer time limit within which Input Tax Credit (ITC) may be availed, together with Rule 61(5) of the CGST/SGST Rules, 2017 (introduced vide Notification No.49/2019-Central Tax). In the alternative, the petitioner sought a reading down of Section 16(4) so as to treat the ITC time limit as merely procedural and directory rather than mandatory. The petitioner also sought to quash a notice bearing No.IV/16/19/2021-22 HPU/375 dated 04.02.2022 issued by the Superintendent (Prev), Central GST and Central Excise, Belagavi, as arbitrary, oppressive, excessive and violative of Articles 14, 19 and 300A of the Constitution. The matter was heard on 17.11.2023 by Justice Anant Ramanath Hegde.

Issues Involved

  1. Whether Section 16(4) of the CGST/SGST Act, 2017 is unconstitutional for restricting the time within which Input Tax Credit can be claimed.
  2. Whether Rule 61(5) of the CGST/SGST Rules, 2017 (Notification No.49/2019-Central Tax) is discriminatory and liable to be struck down.
  3. Whether the impugned notice dated 04.02.2022 issued to the petitioner could be sustained.
  4. Once the constitutional challenge is not pressed, whether the writ court should independently examine the validity of the notice.

Petitioner's Arguments

  • Originally contended that Section 16(4) and Rule 61(5) were illegal, unreasonable, arbitrary and discriminatory, violating Articles 14, 19 and 300A of the Constitution.
  • Alternatively sought that the time limit for taking ITC under Section 16(4) be read down as procedural and directory rather than a hard cut-off.
  • At the hearing, counsel for the petitioner chose not to press the constitutional challenge, in view of the settled position taken by other High Courts, reserving instead the right to pursue the statutory remedy against the notice and any consequential orders.

Respondent's Arguments

  • 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).
  • Relied on the Supreme Court's rulings on analogous time-limit provisions in Jayam and Company v. Assistant Commissioner and Another, (2016) 15 SCC 125, and ALD Automotive Private Limited v. Commercial Tax Officer (CT) and Others, (2019) 13 SCC 225, both of which upheld similar restrictions under the Tamil Nadu VAT Act.
  • Urged that, since the impugned provisions had already been upheld by two High Courts applying binding Supreme Court precedent, the constitutional challenge deserved outright rejection.

Court Order/Findings

  • Since the petitioner's counsel placed on record that the challenge to constitutional validity, and the alternative prayer to read down Section 16(4), were not being pressed, the Court held it need not examine the constitutionality of the provisions at all.
  • The Court held that once the constitutional prayers stand excluded, the petitioner must be relegated to the appellate authority provided under the CGST Act and KGST Act to challenge the impugned order/notice, and must respond to any impugned show-cause notice through the statutory process rather than through a writ.
  • The writ petition was disposed of without expressing anything on the merits of the orders passed or the show-cause notices issued by the authorities.
  • Liberty was granted to avail the statutory appellate remedy, with the time spent in prosecuting the writ petition to be excluded while computing limitation for any appeal or reply to the notice.

Important Clarification

  • Karnataka's Dharwad Bench, in line with the Andhra Pradesh High Court (Thirumalakonda Plywoods) and the Patna High Court (Gobinda Construction), continues to treat the constitutionality of Section 16(4)'s ITC time limit as a settled question, following the Supreme Court's approach to similar time-bar provisions under State VAT laws.
  • Withdrawal or non-pressing of a constitutional challenge does not amount to a decision on the merits of the underlying notice or order — the taxpayer retains the full right to pursue statutory appellate remedies, and courts will protect the limitation period for the time spent in writ litigation.

Sections Involved

  • Section 16(4), CGST Act/SGST Act, 2017 – prescribes the time limit within which a registered person may avail Input Tax Credit for a financial year.
  • Rule 61(5), CGST/SGST Rules, 2017 (Notification No.49/2019-Central Tax) – relates to the manner of furnishing returns, linked to the ITC time-limit dispute.
  • Articles 14, 19 and 300A, Constitution of India – equality before law, freedom to carry on trade, and the right to property, all invoked as grounds of challenge to Section 16(4).

Decision – In Favour of

This matter was disposed of without any ruling on merits. The constitutional challenge was withdrawn by the petitioner rather than rejected by the Court, and the petitioner was left free to pursue the statutory appellate remedy against the impugned notice, with the litigation period excluded from limitation. The outcome is therefore best described as procedural and largely neutral — not a substantive win for either the Assessee or the Department, though the Department's position on the constitutional validity of Section 16(4) went unchallenged and remains undisturbed.

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.101821 of 2022 (T-RES)
  • CNR: 2023:KHC-D:13400
  • Coram: Hon'ble Mr Justice Anant Ramanath Hegde
  • Decision Date: 17 November 2023
  • Disposal Nature: Disposed of – constitutional challenge not pressed, liberty to avail appellate remedy

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