Section 16(2)(c) CGST Act and Rule 36(4) upheld as constitutional for input tax credit requirements

Kerala HC dismissed appeals challenging constitutional validity of Section 16(2)(c) CGST Act and Rule 36(4) CGST Rules regarding input tax credit (ITC) requirements. Court held ITC is a statutory benefit/concession, not a right, subject to prescribed conditions including production of tax invoices. Appellants failed to produce required tax invoices despite opportunities and did not attend personal hearings. Court ruled tax legislation requires judicial restraint unless manifestly unjust or glaringly unconstitutional. The provisions were found non-discriminatory and constitutionally valid as they merely prescribe reasonable conditions for availing ITC benefits.

---

---

Issues involved:
Entitlement of purchasing dealer to take credit of input tax under CGST Act; Constitutional challenge to Section 16(2)(c) of CGST Act and Rule 36(4) of CGST Rules.

Entitlement to Input Tax Credit:
The judgment addressed the entitlement of purchasing dealers to claim input tax credit under Section 16 of the Central Goods and Services Tax Act. It emphasized that input tax credit is a benefit granted under the statutory scheme and not an absolute right. The conditions for availing this benefit include possession of a valid tax invoice, proof of receipt of goods or services, and actual payment of tax to the Government. The judgment highlighted the importance of complying with these conditions to claim input tax credit.

Challenges by Appellants:
The appellants, engaged in businesses named M/s. N.S Metals and M/s. Light House, challenged the denial of input tax credit by the Assessing Authority based on discrepancies in their returns. They contested the constitutional validity of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules. The appellants argued that these provisions were discriminatory and arbitrary, violating Article 14 of the Constitution of India.

Validity of Statutory Provisions:
The judgment clarified that the provisions in question do not discriminate between purchasing and selling dealers. It emphasized that the conditions set forth for availing input tax credit are not arbitrary or unreasonable. The court highlighted that tax legislation should not be easily interfered with unless it is manifestly unjust or unconstitutional. The appellants' challenge to the constitutional validity of the provisions was deemed vague and lacking in concrete evidence of discrimination.

Dismissal of Appeals:
Ultimately, the High Court dismissed the appeals, upholding the impugned judgments. The court found no illegality or impropriety in the decisions, while also affirming the right of the appellants to challenge assessment orders through appropriate legal channels. The judgment emphasized the importance of following statutory provisions and fulfilling conditions for claiming input tax credit under the CGST Act.

---