2023 (12) TMI 835 - HC - GST

Restriction on Input Tax Credit u/s 16(4) APGST/CGST upheld as constitutional; challenge dismissed, provisions operative

Whether Section 16(4) APGST/CGST (restricting Input Tax Credit) is constitutionally invalid under Articles 14, 19(1)(g) and 300A, and whether the ... Input Tax Credit entitlement - Time limit for claiming ITC under Section 16(4) - Non-obstante clause in Section 16(2) and its scope - Strict compliance of conditions for statutory concession - Penalty for fraudulent claim of ITCInput Tax Credit entitlement - Time limit for claiming ITC under Section 16(4) - Non-obstante clause in Section 16(2) and its scope - Strict compliance of conditions for statutory concession - Whether the appellant was entitled to retain Input Tax Credit claimed for November, 2018 to March, 2019 despite filing returns beyond the time limit prescribed by Section 16(4), and whether the non-obstante clause in Section 16(2) overrides the temporal restriction in Section 16(4). - HELD THAT: - The Court held that entitlement to Input Tax Credit is governed by the scheme of the statute and is a concession subject to the conditions thereunder. Section 16(1) is the enabling provision and the provisions which follow, including Section 16(2) and Section 16(4), operate to restrict and qualify that entitlement. The non-obstante clause in Section 16(2) does not operate to render Section 16(4) otiose; the provisions must be read conjunctively. Consistent with precedents that concessions in taxation statutes are to be strictly construed and that procedural and temporal conditions for claiming concessional benefits are mandatory, the Court agreed with earlier decisions upholding the mandatory nature of a statutory time limit for claiming input credit. As the appellant's returns and claims were filed beyond the period stipulated in Section 16(4), the claim to ITC could not be sustained under the statutory scheme. [Paras 12, 13]The claim for Input Tax Credit for the period November, 2018 to March, 2019 was not maintainable because returns were filed beyond the time limit in Section 16(4); the non-obstante clause in Section 16(2) does not override that temporal restriction.Penalty for fraudulent claim of ITC - Strict compliance of conditions for statutory concession - Whether imposition of penalty for claiming ineligible ITC and for alleged fraudulent mis-statement in GSTR-3B was warranted. - HELD THAT: - The Court accepted the departmental finding that the claim involved a false or dishonest representation in the returns and that a taxing statute may impose penal consequences where the statutory conditions for concession are not met and where the claim is fraudulent. Relying on authorities affirming that conditions for statutory concessions must be strictly followed and that remedial/charging provisions should not be rendered ineffective by an interpretation that defeats their purpose, the Court held that imposition of penalty was justified in the facts of the case. [Paras 7, 13]The penalty imposed for the fraudulent and ineligible claim of Input Tax Credit was upheld.Final Conclusion: For the reasons given, the writ petition and the intra-court appeal are dismissed; the denial of ITC for the period November, 2018 to March, 2019 and the imposition of penalty are sustained. Issues Involved:1. Refusal to Grant Interim Orders2. Challenge to Order-in-Appeal and Refund of Excess Tax3. Eligibility for Input Tax Credit (ITC)4. Interpretation of Section 16 of GST Act5. Fraudulent Claim and Imposition of Penalty6. Constitutional Validity of Section 16(4) of GST ActSummary:1. Refusal to Grant Interim Orders:The intra-court appeal was filed against the order dated 13.06.2023, where the Single Bench held that there was no scope for passing any interim order and required an affidavit from the respondent for final adjudication. The respondents were directed to file their affidavit-in-opposition within a specified time frame.2. Challenge to Order-in-Appeal and Refund of Excess Tax:The appellant challenged the order-in-appeal dated 04.01.2023 under Section 107 of the GST Act, seeking a refund of Rs. 28,63,680/- alleged to have been recovered in excess of 10% of the disputed tax amount and to prohibit further cohesive action. The order denied ITC for the period from November 2018 to March 2019 due to the returns being filed beyond the statutory time limit stipulated in Section 16(4) of the GST Act.3. Eligibility for Input Tax Credit (ITC):The appellant argued that ITC is taken through books of account immediately on receipt of goods and services as per the first proviso to Section 16(2) of the GST Act, and the time limit under Section 16(4) cannot override this scheme. The department contended that returns filed beyond the statutory time limit make the appellant ineligible for ITC, necessitating the reversal of the credit taken and the imposition of a penalty for wilful misstatement.4. Interpretation of Section 16 of GST Act:The appellant contended that Section 16(2) has an overriding effect on Section 16(4) based on the statutory language 'entitled to take credit.' The respondents argued that the non-obstante clause in Section 16(2) does not limit the operation of Section 16(4) and that both sections complement each other in restricting the provisions. The legislative intent is not to make Section 16(4) otiose by applying Section 16(2).5. Fraudulent Claim and Imposition of Penalty:The respondents justified the imposition of a penalty, arguing that the appellant committed fraud by making a false representation in the GSTR-3B return and claiming ineligible ITC. The court referred to various judgments, including ALD Automotive Private Limited and TVS Motor Company Limited, which upheld the principle that ITC is a concession subject to strict compliance with statutory conditions.6. Constitutional Validity of Section 16(4) of GST Act:The court upheld the validity of Section 16(4), rejecting the argument that the non-obstante clause in Section 16(2) overrides Section 16(4). The court agreed with previous judgments that the conditions under which ITC is claimed must be strictly construed and that the statutory scheme does not violate constitutional rights.Conclusion:The appeal and the writ petition were dismissed, with the court finding no grounds to grant the relief sought by the petitioner. No costs were awarded.