TaxTMI 
TaxTMI 
2026 (10) TMI 81
X X X X Extracts X X X X
X X X X Extracts X X X X
....er into the government treasury while taking the eligible input tax credit or in alternative, read down condition laid out in section 16(2)(c) as it compels the taxpayer to verify the payment of taxes which he cannot do in absence of availability if system by the government (lex non cogit ad impossibilia); b) To quash the impugned order under section 74 of CGST Act read with RGST Act dated 24 November 2022 (enclosed as Annexure 2) as illegal, manifestly arbitrary and issued against the principals of natural justice; c) To quash the impugned order dated 24 November 2022 (Annexure 2) as Respondent no. 4 has acted as judge in his own case which is against the principals of natural justice; d) To quash the impugned order dated 24 November 2022 (Annexure 2) as it hampers the vested asset of the petitioner under Article 300A of the constitution of India; e) To issue a writ of Certiorari or any other appropriate writ, order or direction, in the nature of writ quashing the impugned order dated 24 November 2022 (Annexure 2);" 2. At the outset, learned counsel for the petitioner-firm has challenged the validity of Section 16(2)(c) of the Central Goods a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;" 3. Per contra, learned counsel for the respondents submits that Section 16(2)(c) of the Act of 2017 puts an absolute condition that the tax charged in respect of the supply must actually be paid to the Government and, in case the purchaser is not diligent and the tax has not been paid by the supplier, the purchaser shall also have liability in respect of the Input Tax Credit so availed. He further submits that the Input Tax Credit wrongly availed by the present purchaser/petitioner is liable to be refunded/recovered, as Section 16(2)(c) of the Act of 2017 provides the mandate for recovery of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....articularly with Section 9(2)(g) of the DVAT Act, as examined by the Delhi High Court in On Quest Merchandising India (P) Ltd. (supra). It is also noticed that the Tripura High Court, while following in the case of On Quest Merchandising India (P) Ltd. (supra), has read down Section 16(2)(c) of the CGST Act on the ground of practical impossibility for the purchaser to ensure that the supplier has deposited tax. With respect, we are unable to agree with the said view. The Tripura High Court proceeded on the premise that ITC is intended solely to avoid double taxation under the CGST regime, but did not adequately consider the interplay of Sections 41 and 53 of the CGST Act read with Rule 37A of the CGST Rules, 2017. 69. It may also be noted that neither the Delhi High Court in the case of On Quest Merchandising India (P) Ltd. (supra) nor the Tripura High Court has examined the effect of Section 155 of the CGST Act, which reads as under: "Section 155 - Burden of proof: Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person." 70. Thus, the purchasing dealer must discharge the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d pay taxes. While it acts as the official record of the taxpayer's tax liability and payment, it does not automatically prove that a supplier has paid tax to the government as required by Section 16(2)(c). Instead, the recipient must verify this via GSTR-2B and temporarily reverse ITC in GSTR-3B Table 4(B)(2) if the supplier has not paid it. Effective October 1, 2022, Section 41(2) specifically requires the recipient to reverse Input Tax Credit (ITC), plus applicable interest, if the supplier fails to deposit the tax. However, the proviso also establishes a mechanism for re-availing this credit once the tax is eventually paid. 75. The operational procedure for this reversal and re-availing was introduced via Rule 37A on December 26, 2022. This rule offers a grace period, allowing recipients to retain ITC even if the supplier has not paid the tax by September 30 of the following financial year. Recipients are granted until November 30 to reverse the ITC; interest liabilities only accrue if the reversal is missed beyond this November deadline. While Section 16(2)(c) must be strictly observed to protect government revenue, the provisions of Section 41 and Rule 37A acknowledg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been paid in full. The provisions of Section 16(2)(c) of the CGST Act 2017 are invoked when the corresponding payment of Tax has not been fulfilled by the supplier. Likewise proviso to Section 41(2) mentions that the purchaser can reclaim the reversed ITC later on when the supplier pay the tax. 78. Now, the proposition advanced by the petitioners that the provisions of Section 16 of the CGST Act and the clauses mentioned therein are to be read independently is misconceived. It was contended before us that the Revenue must stop at the stage of clause (b) of sub-section (2) of Section 16 of the CGST Act and, once that exercise is complete, cannot proceed to clause (c). We do not subscribe to the submissions advanced by the petitioners. 79. ITC falls under Chapter V and Section 16 of the CGST Act deals with the eligibility and conditions for availing such credit. The provision itself contains the necessary checks and balances for claiming input tax credit. The first and foremost condition is that a dealer (registered person) must be in possession of a tax invoice or debit note issued by a supplier registered under the Act. The second condition, as stipulated in claus....