The Calcutta High Court, reaffirming the prevalence of time limit conditions imposed on filing of Goods and Services Tax Returns over legal right to claim Input Tax Credit (ITC), upheld the constitutional validity of the Section 16(4) of the Central Goods and Services Tax Act, 2017.
The appellant challenged an order-in-appeal dated 04.01.2023, seeking a directive to refund Rs.28,63,680, alleged excess recovery of tax. The writ petition aims to prevent further action by respondents.
The impugned order, under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST) and West Bengal Goods and Services Tax Act, 2017 (WBGST), denied Input Tax Credit of Rs.28,65,780 for Nov ’18 to Mar ’19, citing late filing beyond the statutory time limit of Section 16(4) of the GST Act (expired on 20.10.2019).
The appellant sought an extension but, on 04.01.2021, the second respondent ordered payment of tax, penalty, and interest, citing the statutory timeframe for ITC claims. Despite reminders, the appellant did not comply, and on 11.09.2021, the department debited the amount. The appellant appealed, but on 04.01.2023, the first respondent upheld the order, stating the appellant exceeded the ITC time limit (20.10.2019).
The Division Bench of Calcutta HIgh Court presided over by Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya heard Vinay Shraff, Advocate appearing for the appellant, assisted by Priya Sarah Paul, advocate for the appellant and T.M. Siddiqui, Additional Government Pleader assisted by T. Chakraborty and S Sanyal for the respondent department.
The appellant’s case was that they had submitted the returns in GSTR-3B for the period from November, 2018 to March, 209 on 20.10.2019 which is admittedly beyond the due date of submission of the return for the month of September, 2019.
The department’s contention is that the returns having been filed beyond the statutory time limit the appellant becomes ineligible for Input Tax Credit and consequently he has to reverse the credit taken and having willfully mis-stated the particulars and availed the benefit they are liable to pay a penalty. The contention of the appellant is that Input Tax Credit is not taken through the return but it is taken through the books of account immediately on receipt of goods and services in terms of first proviso to Section 16(2) of the GST Act.
It was submitted that the time limit under Section 16(4) cannot supersede or override the scheme of the statute as operation of Section 16(4) makes the non-obstante provision namely Section 16(2) meaningless. In other words, it is contended that Section 16(2) has an overriding effect on Section 16(4) as is evident from the words used in the statute, “entitled to take credit”.
Thus, the appellant contended entitlement of a particular right after fulfilling the prescribed and specified conditions results into a right, “taking” or “availing” or “utilizing” that right through procedural formalities or furnishing a return by the person who is entitled to that right is a matter of his choice.
Further, it was argued by the appellant that in Section 16(1) of the GST Act, there is no mention of any time limit or time element and there is no visible linkage of Sub-section (1) with Sub-section (4) of Section 16 of the Goods and Services Tax Act.
The respondents-revenue sought to sustain the orders passed by the authorities contending that the statute should be interpreted in the light of the entire text and exception clauses or non-obstante clauses should not be interpreted in isolation from the main enacting provision.
It was submitted that the purpose of non-obstante clause must be ascertained with which the legislature has inserted it. Non-obstante clause is employed to give an overriding effect to some contrary provision but not a complementary provision.
The revenue contended that, “The language of Section 16 is clear that the non-obstante clause in Section 16(2) does not in any manner limit the operation of Section 16(3) or Section 16(4) and they are not contradicting, rather they all being to restrict the provisions, are basically complementing each other and are limiting the scope and operation of Section 16(4). Further, it is submitted that the legislative intent is not to make Section 16(4) otiose by applying Section 16(2) of the Act. Conjoint reading of Section 16(2)(d) and Section 16(4) make it clear that the entitlement to the credit of any Input Tax in respect of any supply of goods or services or both arises after filing of return under Section 39 of the Act.”
The Bench observed that, “The Hon’ble Supreme Court in TVS Motor Company Limited after taking note of the decision in ALD Automotive held that ITC is a form of concession which is provided by the Act; it cannot be claimed as a matter of right but only in terms of the provision of the statute; therefore the conditions mentioned had to be fulfilled by the dealer”
It was further observed by the Calcutta High Court Division Bench that, “Very recently, the Hon’ble Division Bench of the High Court of Andhra Pradesh had considered an identical case as that of the case on hand, wherein a pari materia provision under the Andhra Pradesh General Sales Tax, 2017 namely Section 16(4) of the Act was considered in a challenge to its validity on the ground that it violates Article 14, 19(1)(g), and 300A of the Constitution of India; whether the non-obstante clause in Section 16(2) of the APGST, CGST Act, 2017 would prevail Section 16(4) of the APGST/CGST Act, 2017.
It was noted that, “the argument advanced before us by the learned Advocate for the appellant were identical to that of the arguments which were placed by the petitioners/assessee in the said case and the same was rejected, in our view rightly on the ground that Section 16(2) prescribes, the eligibility criteria which is mandatory and in the absence of fulfillment of the eligibility criteria the dealer will not be entitled to claim ITC.”
For all the above reasons, the Calcutta High Court found no ground to grant the relief sought for by the petitioner in the writ petition.
In result, the appeal as well as the writ petition filed were dismissed.
The Calcutta High Court’s recent ruling on the overriding effect of ITC provisions over the time limit of filing returns marks a significant legal precedent. In upholding the constitutional validity of Section 16(4) of the Goods and Services Tax Act, the court has reaffirmed the importance of adhering to statutory time limits in claiming Input Tax Credit (ITC).
In delivering its verdict, the Division Bench, comprising Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya, emphasized that ITC is a concession provided by the Act, not a matter of absolute right, and fulfillment of eligibility criteria is mandatory.
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