Patna High Court: In a case wherein number of writ applications were filed under Article 226 of the Constitution to challenge the constitutional validity of the Section 16(4) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and Section 16(4) of the Bihar Goods and Services Tax Act, 2017 (‘BGST Act’) which deny entitlement of Input Tax Credit (‘ITC’) in respect of any invoice or debit note for supply of goods or services or both after due date of furnishing of returns under Section 39 of the CGST Act and BGST Act, the Division bench of Chakradhari Sharan Singh* and Madhuresh Prasad, JJ., opined that the language of Section 16 of the CGST/BGST Act suffered from no ambiguity and clearly stipulated grant of ITC subject to the conditions and restrictions put thereunder. Thus, the Court held that Section 16(4) of the CGST/BGST Act were constitutionally valid and were not violative of Articles 19(1)(g) and Article 300-A of the Constitution and were also not inconsistent with or in derogation of any of the fundamental rights guaranteed under the Constitution.
Background
In the present case, the petitioners were seeking a declaration that the conditions prescribed in Section 16(4) of the CGST/BGST Act were merely procedural in nature and could not override the substantive conditions for availing ITC prescribed under Section 16(1) and Section 16(2) of the CGST/BGST Act. The petitioners submitted that because of the non obstante clause in Section 16(2) of the CGST/BGST Act, the same shall prevail over Section 16(4) of the CGST/BGST Act. The petitioners also submitted that by reading down the provisions under Section 16(4) of the CGST/BGST Act, this Court should declare that the embargo in the said provision would apply only to restrict claim of ITC in respect of invoices or debit notes received after the end of the financial year beyond September of the preceding financial year.
The petitioners were further seeking a declaration that GSTR-3B could not be treated to be a return prescribed under Section 39(1) of the CGST Act as it did not satisfy the parameters of a return contemplated under Section 39(1) of the said Act. In addition to this, the petitioners were also seeking a declaration that Rule 61(5) of the CGST Rules, 2017, as amended retrospectively prescribing Form GSTR-3B as a return under Section 39(1) of the CGST Act was ultra vires Section 39(1) of the CGST Act itself.
Analysis, Law, and Decision
The Court observed that the language of Section 16(4) of the CGST/BGST Act, was plain and unambiguous with clear stipulation that a registered person could not avail the benefit of ITC in respect of any invoice or debit note for supply of goods or services or both after due date of furnishing the return under Section 39 of the CGST/BGST Act for the month of September following the end of financial year to which such invoice or invoices of such debit note pertain or furnishing of the relevant annual return, whichever was earlier. The Court noted that the petitioners have challenged the constitutional validity of Section 16(4) of the CGST/BGST Act itself being violative of Articles 14 and 300-A of the Constitution.
The issue for consideration before this Court was “whether ITC per se was a vested right, the denial of which by operation of Section 16(4) of the CGST/BGST Act would amount to infringement of the constitutional right under Article 300-A of the Constitution?”.
The Court opined that the language of Section 16 of the CGST/BGST Act suffered from no ambiguity and clearly stipulated grant of ITC subject to the conditions and restrictions put thereunder. The Court further opined that ITC was not unconditional and a registered person became entitled to ITC only if the requisite conditions stipulated therein were fulfilled and the restrictions contemplated under Section 16(2) did not apply. The Court noted that one of the conditions to make a registered person entitled to take ITC was prescribed under Section 16(4) and as per which the right of a registered person to take ITC becomes a vested right only if the conditions to take it were fulfilled, as prescribed under Section 16(2). The Court further noted that to invoke Article 300-A of the Constitution by a person, two circumstances must jointly exist, firstly, deprivation of property of a person, and secondly, without sanction of law.
The Court opined that the provision under Section 16(4) was one of the conditions which made a registered person entitled to take ITC and by no means Section 16(4) could be said to be violative of Article 300-A of the Constitution of India. The Court opined that “the doctrine of reading down a statutory provision applied only when general words used in a statute or regulation should be construed in a particular manner to save its constitutionality. There was always a presumption of constitutional validity of a legislation, with the burden of showing the contrary, lying heavily upon someone who challenged its validity”.
The Court opined that the petitioner’s submission that Section 16(4) imposed unreasonable and disproportionate restriction on the right to freedom of trade and profession guaranteed under Article 19(1)(g) of the Constitution and was, therefore, violative of Article 302 of the Constitution and was in teeth of Article 13 of the Constitution, was founded on the ground of absence of any rationale behind fixation of a cut-off-date for filing of return.
The Court relied on ALD Automotive (P) Ltd. v. CTO, (2019) 13 SCC 225, wherein the Supreme Court held that the ITC was in the nature of benefit/ concession extended to a dealer under the statutory scheme and the concession could be received by the beneficiary only as per the scheme of the statute. The Court further opined that the concession of ITC under Section 16(1) of the CGST/BGST Act was dependent upon the fulfillment of requisite conditions laid down under various provisions including Section 16(4) thereof and therefore, the petitioner’s submissions that this Court might declare the requirement of Section 16(4) as directory and not mandatory, was not at all tenable in view of the clear language used in Section 16.
Thus, the Court dismissed the writ applications and held that Section 16(4) of the CGST/BGST Act were constitutionally valid and were not violative of Articles 19(1)(g) and Article 300-A of the Constitution and were not inconsistent with or in derogation of any of the fundamental rights guaranteed under the Constitution.
[Gobinda Construction v. Union of India, Civil Writ Jurisdiction Case No. 9108 of 2021, decided on 08-09-2023]
*Judgment authored by: Justice Chakradhari Sharan Singh
Advocates who appeared in this case :
For the Petitioner/s: D.V. Pathy, Gautam Kumar Kejriwal, Anurag Saurav, Mohit Agarwal, Archana Sinha @ Archana Shahi, Vikas Kumar, Prince Kumar Mishra, Manju Jha, Naresh Chandra Verma, Parijat Saurav, Roona, Prabhat Ranjan, Abhay Kumar Thakur, Satish Chandra Jha-3, Sriram Krishna, Ranjeet Kumar, Nishant Ranjan, Alok Kumar, Mohit Agarwal, Dheeraj Kumar, Naman Nayak, Advocates
For the Respondent/s: K.N. Singh (ASG); Krishna Nandan Singh (ASG); Vikash Kumar (SC 11); Vivek Prasad (GP 7); Raghwanand (GA 11); Pratik Kumar, AC to GA-11
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