2023 (7) TMI 1226 - HC - GST

Andhra Pradesh HC upholds Section 16(4) time limits for claiming Input Tax Credit under GST Act

The Andhra Pradesh HC dismissed a petition challenging the constitutional validity of Section 16(4) of APGST/CGST Act, 2017 regarding time limits for ... Eligibility and conditions for taking input tax credit - Time limit for claiming input tax credit - Non-obstante clause and its scope - Input tax credit as a concession/benefit and not a vested right - Statutory interpretation - text and context - Constitutional challenge under Article 14, Article 19(1)(g) and Article 300A - Principles of natural justice and show-cause procedureTime limit for claiming input tax credit - Input tax credit as a concession/benefit and not a vested right - Constitutional challenge under Article 14, Article 19(1)(g) and Article 300A - Validity of Section 16(4) prescribing a time limit for claiming ITC and its challenge under Articles 14, 19(1)(g) and 300-A of the Constitution - HELD THAT: - The Court examined the scheme of Section 16 (eligibility in sub s (2); restrictions in sub ss (3) and (4)) and held that ITC is a statutory concession/benefit subject to conditions. Reliance on precedents established that taxing statutes and concessions must be interpreted strictly and that the legislature may prescribe conditions, including time limits, for availing concessions. The Court found no arbitrariness in prescribing a cut off for claims; the operative spheres of the constitutional provisions relied upon are distinct from the fiscal limitation under Section 16(4). Authorities upholding analogous time prescriptions for ITC claims were treated as persuasive. Consequently, Section 16(4) is not unconstitutional on the grounds pleaded. [Paras 27]Section 16(4) is not violative of Articles 14, 19(1)(g) or 300-A and is constitutionally valid.Non-obstante clause and its scope - Eligibility and conditions for taking input tax credit - Time limit for claiming input tax credit - Whether the non obstante clause in Section 16(2) overrides or nullifies the time limit in Section 16(4) - HELD THAT: - The Court analysed the purpose and ordinary meaning of Section 16(2) and (4). Section 16(2), though beginning with a non obstante clause, operates as a restricting provision specifying eligibility conditions and does not enable ITC per se (that function is in sub s (1)). A non obstante clause gives overriding effect only where a true conflict exists. Since sub s (2) and sub s (4) are complementary restricting provisions with no inconsistency, sub s (2) cannot be construed to override or nullify the temporal restriction imposed by sub s (4). The legislature's insertion of an express time limit in sub s (4) confirms the intent to impose temporal limitation independent of eligibility conditions. [Paras 27]Section 16(2) does not override Section 16(4); both operate independently.Eligibility and conditions for taking input tax credit - Time limit for claiming input tax credit - Whether acceptance of belated Form GSTR-3B filed with payment of late fee absolves delay in claiming ITC beyond the period in Section 16(4) - HELD THAT: - The Court held that filing of GSTR 3B with payment of late fee admits the return for assessment of taxable turnover but does not operate as a licence to circumvent independent statutory conditions for claiming ITC. The conditions in Section 16(2) and the temporal bar in Section 16(4) operate independently; collection of late fee cannot be treated as validating an otherwise time barred ITC claim. [Paras 27]Acceptance of return with late fee does not exonerate delay in claiming ITC beyond the period specified in Section 16(4).Principles of natural justice and show-cause procedure - Eligibility and conditions for taking input tax credit - Whether the assessment/summary order dated 14.03.2022 was vitiated by defective service of show cause notice or denial of opportunity to be heard - HELD THAT: - The Court reviewed the impugned assessment order and the departmental record indicating that the petitioner was issued show cause notice, filed written objections, and was accorded personal hearing. The 1st respondent discussed and rejected the petitioner's multiple factual and legal objections in the assessment order. On that review the Court found no merit in the contention that procedure under the GST rules or principles of natural justice were breached so as to vitiate the order. [Paras 28]The challenge to service and hearing was rejected; the assessment/order is not vitiated on procedural grounds.Final Conclusion: The writ petition is dismissed. The Court upheld the constitutionality and operation of Sections 16(2) and 16(4) as independent provisions, held that belated filing with late fee does not validate time barred ITC claims, and found no procedural illegality in the assessment; no costs. Issues Involved:1. Constitutionality of Section 16(4) of APGST Act and CGST Act, 2017.2. Prevalence of Section 16(2) over Section 16(4) of APGST/CGST Act, 2017.3. Effect of late fee payment on the validity of ITC claims.4. Validity of summary order issued without proper notice and opportunity for hearing.Summary:Issue 1: Constitutionality of Section 16(4) of APGST Act and CGST Act, 2017The petitioner argued that Section 16(4) of the APGST Act and CGST Act, 2017, which imposes a time limit for claiming Input Tax Credit (ITC), violates Articles 14, 19(1)(g), and 300-A of the Constitution of India. The court found that ITC is a concession, not a statutory or constitutional right, and imposing conditions, including time limits, does not violate constitutional provisions. The court cited several precedents, including Jayam and Co. v. Assistant Commissioner and ALD Automotive Pvt. Ltd. v. Commercial Tax Officer, to support the view that ITC is a benefit subject to legislative conditions.Issue 2: Prevalence of Section 16(2) over Section 16(4) of APGST/CGST Act, 2017The petitioner contended that Section 16(2), which starts with a non obstante clause, should override Section 16(4). The court clarified that Section 16(2) is a restricting provision that sets eligibility criteria for ITC and does not enable ITC claims. Section 16(4) imposes a time limit for claiming ITC, and both provisions operate independently without contradiction. The court held that the non obstante clause in Section 16(2) does not override the time limit in Section 16(4).Issue 3: Effect of late fee payment on the validity of ITC claimsThe petitioner argued that the acceptance of Form GSTR-3B returns with a late fee should exonerate the delay in claiming ITC. The court rejected this argument, stating that the conditions in Sections 16(2) and 16(4) are mutually different and operate independently. The payment of a late fee is for admitting the returns for verification of taxable turnover, not for considering ITC claims.Issue 4: Validity of summary order issued without proper notice and opportunity for hearingThe petitioner claimed that the summary order was issued without proper notice and sufficient opportunity for hearing. The court found that the objections raised by the petitioner were discussed and rejected in the impugned assessment order. The court concluded that the proper procedure was followed, and the contentions lacked merit.Conclusion:1. The time limit for claiming ITC under Section 16(4) of APGST/CGST Act, 2017, is constitutional and does not violate Articles 14, 19(1)(g), and 300-A of the Constitution of India.2. Section 16(2) does not override Section 16(4); both provisions operate independently.3. Acceptance of Form GSTR-3B returns with a late fee does not validate ITC claims made beyond the period specified in Section 16(4).4. The summary order issued by the 1st respondent followed proper procedure, and the petitioner's contentions were without merit.The writ petition was dismissed with no costs.