The Andhra Pradesh High court ruled that there was no contradiction between under Section 16(2) and 16(4) of the Andhra Pradesh Goods and Service Tax (APGST) Act, 2017 regarding the basic conditions for availing Input Tax Credit (ITC).
The issue to be decided was whether under Section 16(2) of the CGST Act, 2017 would prevail over section 16(4) of CGST Act, 2017 and thereby if the conditions laid down in Section 16(2) of the CGST Act 2017 are fulfilled, the time limit prescribed under section 16(4) of the CGST Act for claiming ITC will pale into insignificance
The counsel for the petitioner Rama Krishna Kumar Potturi contented that, since the Form GSTR-3B return of March 2020 filed on 27.11.2020 by the petitioner was accepted with a late fee of Rs.10,000/-, such acceptance would exonerate the delay in filing the return U/s 16(4) of the CGST Act. Therefore, along with his return, the Input Tax Credit (ITC) claim should also be considered. In the considered view, this argument holds no much force for the reason that the conditions stipulated in Section 16(2) and (4) are mutually different, and both will operate independently.
Therefore, the mere filing of the return with a late fee will not act as a springboard for claiming ITC. As rightly argued by the learned Advocate General, the collection of late fees is only for the purpose of admitting the returns for the verification of the taxable turnover of the petitioner, but not for the consideration of ITC. Such a statutory limitation cannot be stifled by collecting late fees.
The clear argument presented by the Advocate General was that it was a misnomer to elevate the refund claim of Input Tax Credit (ITC) to the level of an unbridled legal right, as, in reality, it is no more than a statutory rebate or a mere concession given to a GST assessee, as echoed in several judgments. He cited cases such as Jayam and co. v. Assistant Commissioner, USA Agencies v. The Commercial Tax Officer, ALD Automotive Private Limited v. Commercial Tax Officer.
He emphasized that, since ITC is only a concession or rebate, the legislature, in its wisdom, has imposed certain conditions, including the prescription of time limits under Section 16(2) and (4) of the APGST/CGST Act, 2017, which must be fulfilled by the assessee before laying a claim for the refund of ITC. Therefore, he argued that neither the conditions mentioned in Section 16(2) nor the time limit in Section 16(4) can be deemed illegal or unconstitutional.
He submitted that, even if ITC is assumed to be a legal right, the legislature has the right to impose a time limit for claiming such right, citing the Indian Limitation Act, 1863, where time prescription was made even against the statutory right of filing an appeal. Therefore, the ITC claim, even if considered a legal right, cannot claim exemption. To support this argument, he referred to the case of Willowood Chemicals Pvt Ltd. v. Union of India.
The division bench of the court comprising Justice Durga Prasad Rao and Justice Mallikarjuna observed that Section 16(4), being a non-contradictory provision and capable of clear interpretation, would not be overridden by the non-obstante provision U/s 16(2) of the CGST Act 2017.
As already stated 16(4) only prescribes a time restriction to avail credit. For this reason, the argument that 16(2) overrides 16(4) was not correct. Thus, in substance, Section 16(1) was an enabling clause for Input Tax Credit (ITC); 16(2) subjects such entitlement to certain conditions; Section 16(3) and (4) further restrict the entitlement given U/s 16(1). That being the scheme of the provision, it is out of context to contend that one of the restricting provisions overrides the other two restrictions.
The issue can be looked into otherwise also. If really the legislature had no intention to impose a time limitation for availing ITC, there was no necessity to insert a specific provision U/s 16(4) and to further intend to override it through Section 16(2), which is a futile exercise.
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