Section 16(4) of CGST Act Upheld: Denial of ITC for Late Filing Is Lawful and Constitutional

The HC upheld the constitutional validity of Section 16(4) of the CGST/BGST Act, ruling that denial of ITC for delayed return filing is lawful and not violative of Articles 14, 19(1)(g), or 300-A. The court held that ITC entitlement is conditional and not an absolute right; restrictions under Section 16(4) serve a legislative purpose and are not arbitrary. The petitioners' challenge that the provision infringes fundamental rights and property rights was rejected. The writ petitions were dismissed, affirming that the cut-off date for claiming ITC is constitutionally permissible and does not violate the right to trade or property.

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Issues Involved:
1. Constitutional Validity of Section 16(4) of the CGST/BGST Act
2. Procedural vs. Substantive Conditions for Availing ITC
3. Validity of GSTR-3B as a Return under Section 39(1) of the CGST Act

Summary:

1. Constitutional Validity of Section 16(4) of the CGST/BGST Act:

The petitioners challenged the constitutional validity of Section 16(4) of the CGST/BGST Act, arguing that it denies entitlement of Input Tax Credit (ITC) after the due date of furnishing returns, which is violative of Articles 14 and 300A of the Constitution of India. They contended that ITC is a vested right under Article 300A and cannot be taken away due to late filing of returns. The court found that Section 16(4) of the CGST/BGST Act is clear and unambiguous, stipulating that a registered person cannot avail ITC after the due date. The court held that ITC is not an unconditional right but subject to conditions and restrictions under the Act. The court concluded that Section 16(4) is constitutionally valid and not violative of Articles 19(1)(g) and 300A of the Constitution.

2. Procedural vs. Substantive Conditions for Availing ITC:

The petitioners argued that the conditions prescribed in Section 16(4) are merely procedural and cannot override the substantive conditions for availing ITC under Sections 16(1) and 16(2). They claimed that the non-obstante clause in Section 16(2) should prevail over Section 16(4). The court held that the language of Section 16 is clear, and the conditions under Section 16(4) are mandatory for availing ITC. The court rejected the argument that Section 16(4) should be read down, stating that there is no ambiguity in the provision that would necessitate such an interpretation.

3. Validity of GSTR-3B as a Return under Section 39(1) of the CGST Act:

The petitioners sought a declaration that GSTR-3B cannot be treated as a return prescribed under Section 39(1) of the CGST Act, arguing that it does not satisfy the parameters of a return contemplated under Section 39(1). They also challenged Rule 61(5) of the CGST Rules, which prescribes Form GSTR-3B as a return under Section 39(1), as ultra vires. The court did not find merit in this argument, stating that the statutory scheme under Section 16 of the CGST/BGST Act with the restriction under sub-section (4) has uniform application and is not arbitrary.

Conclusion:

The court dismissed the writ applications, upholding the constitutional validity of Section 16(4) of the CGST/BGST Act and confirming that the conditions for availing ITC under this section are mandatory and not merely procedural. The court also rejected the challenge to the validity of GSTR-3B as a return under Section 39(1) of the CGST Act.

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