Section 16(4) CGST KGST Act constitutional challenge disposed following Sadhana Enviro Engineering precedent

The Karnataka HC disposed of a petition challenging the constitutional validity of Section 16(4) of the CGST and KGST Act, 2017 on grounds of violating Articles 14, 19(1)(g) and 300A. The court followed its earlier decision in M/s. Sadhana Enviro Engineering Services case, noting that Section 16(5) amendment addressed the issues. The petition was allowed and parties were directed to approach the original authority for implementation of amended provisions with reasonable opportunity for hearing in accordance with law.

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Issues:
Challenge to Order-in-Appeal under GST Act, 2017, Declaration of Section 16(4) as unconstitutional, Relief sought from the Court.

Analysis:
The petitioner sought a writ to quash an Order-in-Appeal and declare Section 16(4) of the CGST and KGST Act, 2017 unconstitutional. The Court considered the issue covered by a previous judgment and examined a new provision, Section 16(5), inserted by "The Finance (No. 2) Act, 2024," extending the time limit for availing credit. The petitioner argued for the implementation of this new provision, enabling them to claim credit until 30.11.2021 for specific financial years. The respondents agreed on the applicability of Section 16(5) and assured necessary notifications would be issued. The Court acknowledged the insertion of Section 16(5) and directed parties to original authority for implementation, providing a reasonable opportunity for the petitioner. The impugned blocking of Input Tax Credit ledger was quashed, and respondents were instructed to unblock and release the credit balance promptly.

The Court disposed of the petition in line with the previous judgment and allowed the petition, quashing the impugned Orders and directing parties to the show cause notice stage. The respondents were directed to implement Section 16(5) by providing a reasonable opportunity for the petitioner within a month. The Court kept all other contentions open for future consideration and expressed no opinion on those matters. The judgment was in favor of the petitioner, granting relief in accordance with the law and the newly inserted provision, Section 16(5) of the CGST and KGST Act, 2017.

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