Input tax credit under GST upheld as a statutory concession; reading down rejected for supplier tax default cases.

Section 16(2)(c) of the CGST Act was examined against the input tax credit framework and upheld as constitutional. The Court treated input tax credit as a statutory concession, not an absolute right, and read the provision with the surrounding mechanisms on reversal, re-availment, burden of proof, and GST returns that protect revenue interests and allow recovery from defaulting suppliers. It rejected reading down because the text was clear and no constitutional infirmity was shown, and it refused to confine the clause only to fraudulent or collusive transactions.

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Issues: Whether Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 is unconstitutional or requires reading down so as to exclude bona fide purchasers where the supplier fails to remit tax to the Government.

Analysis: The provision was examined in the light of the statutory scheme governing input tax credit, including the conditions in Section 16, the reversal and re-availment mechanism in Section 41(2), the burden of proof in Section 155, and the GST return framework. The Court held that input tax credit is a statutory concession, not an absolute right, and that Section 16(2)(c) cannot be read in isolation from the accompanying provisions that preserve revenue interests and permit recovery from defaulting suppliers. The Court further held that the doctrine of reading down is not available where the provision is clear and does not produce constitutional infirmity, and that the statutory mechanism does not justify striking down the clause or restricting it only to fraudulent or collusive transactions.

Conclusion: Section 16(2)(c) was upheld and was not read down; the constitutional challenge was rejected and the plea to confine the provision only to fraudulent or collusive cases failed.

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