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Facts of the Case

A batch of writ applications led by Gobinda Construction, a Patna-based partnership firm, challenged the constitutional validity of Section 16(4) of the CGST/BGST Act, 2017, which denies Input Tax Credit on invoices where the corresponding return is filed after the due date (30th September of the following year or the annual return date, whichever is earlier). Gobinda Construction had filed its GSTR-3B for February and March 2019 belatedly, on 23.10.2019 and 07.11.2019. A Section 73 show-cause notice followed, and the Assistant Commissioner disallowed ITC of Rs. 1,34,12,983/- for breach of Section 16(4); the first appeal was dismissed on 06.02.2021. Several connected petitioners with similar disallowances joined the batch, framing the common constitutional question.

Issues Involved

  1. Whether Section 16(4) of the CGST/BGST Act is unconstitutional as violative of Articles 14, 19(1)(g) and 300-A of the Constitution.
  2. Whether the time-limit in Section 16(4) is merely procedural and must yield to the substantive conditions for ITC under Section 16(1) and 16(2).
  3. Whether GSTR-3B qualifies as a "return" under Section 39(1) of the CGST Act for the purpose of triggering the Section 16(4) cut-off.

Petitioner's Arguments

  • Petitioners argued that ITC is a vested property right under Article 300-A, and that denying it purely for delayed filing, without any loss of revenue, amounts to an unconstitutional deprivation of property.
  • It was contended that Section 16(4) imposes an unreasonable restriction on the fundamental right to carry on trade and business under Article 19(1)(g), disproportionate to any legitimate regulatory objective.
  • Reliance was placed on the non-obstante clause in Section 16(2) to argue it overrides the time-limit in Section 16(4), and that GSTR-3B does not satisfy the parameters of a return under Section 39(1).

Respondent's Arguments

  • The Union of India and the State of Bihar submitted that ITC is a statutory concession, not an absolute right, and can only be availed strictly as per the conditions Parliament has prescribed, including timelines.
  • Reliance was placed on Supreme Court precedent (ALD Automotive, Jayam and Company) upholding similarly structured input-credit time-limits under State VAT laws as constitutionally valid and non-arbitrary.
  • It was argued that a fiscal statute of uniform application to all registered persons cannot be said to violate Article 19(1)(g), and that no case for reading down Section 16(4) was made out.

Court Order / Findings

  • The Division Bench held that ITC is a statutory concession conditional on compliance with Section 16, and its denial for non-compliance with the Section 16(4) timeline does not amount to deprivation of "property" attracting Article 300-A.
  • The Court found no merit in the argument that Section 16(4) is arbitrary or disproportionate; a fiscal provision of uniform application to all registered persons cannot be said to violate Article 19(1)(g).
  • Section 16(4) of the CGST/BGST Act was held to be constitutionally valid, and all the writ applications, including Gobinda Construction's, were dismissed with no order as to costs.

Important Clarification

  • Input Tax Credit is a concession granted by statute, not an indefeasible or vested right, and can be conditioned on procedural requirements including filing timelines, without offending Articles 14, 19(1)(g) or 300-A.
  • GSTR-3B is treated as a valid return for the purposes of Section 39(1) and therefore for computing the Section 16(4) cut-off date, foreclosing arguments that late GSTR-3B filings escape the ITC time bar.

Sections Involved

  • Section 16(4), CGST/BGST Act, 2017 – bars ITC on invoices where the return is filed after the prescribed cut-off date.
  • Section 16(1) and (2), CGST Act, 2017 – lay down the substantive conditions for availing ITC.
  • Section 39(1), CGST Act, 2017 and Rule 61(5), CGST Rules – concern filing of returns, including GSTR-3B.
  • Articles 14, 19(1)(g) and 300-A, Constitution of India – constitutional provisions invoked to challenge Section 16(4).

Decision – In Favour of

The decision is squarely in favour of the Department. The constitutional validity of Section 16(4) was upheld and all connected writ applications, including the lead case of Gobinda Construction, were dismissed.

Case Details

Court: High Court of Judicature at Patna
Case No.: CWJC No. 9108/2021 with CWJC No. 2854/2021 and connected cases
CNR / Citation: Not available in judgment text
Coram: Hon'ble Mr. Justice Chakradhari Sharan Singh and Hon'ble Mr. Justice Madhuresh Prasad
Date of Order: 08 September 2023

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