The High Court of Andhra Pradesh has held that Section 16(2) of the Central Goods and Services Tax (CGST) Act, 2017 does not possess an overriding effect on Section 16(4), as both sections are considered mutually exclusive and independent in their operation.
The judgment came in response to the writ petition filed by the assessee Thirumalakonda Plywoods through its sole proprietor Kondalaiah Sunduru challenging the constitutionality and interplay of these sections.
The petitioner assessee, Thirumalakonda Plywoods carries out hardware and plywood business in Andhra Pradesh.
The case revolved around the petitioner’s objections against the order of the Assistant Commissioner of State Tax proposing tax, penalty and interest due to their delayed filing of monthly returns and Input Tax Credit (ITC) claims.
The concept of ITC allows buyers to offset the tax paid on purchases against the tax they owe on sales. It is meant to eliminate the cascading effect of taxes. Section 16(2) of the Andhra Pradesh Goods and Services Tax (APGST) Act outlines eligibility criteria for ITC, while subsections (3) and (4) impose conditions and limitations. Section 16(4) restricts ITC claims if returns are not filed within a specified time.
The petitioner, represented by Sri Rama Krishna Kumar Potturi had contended that Section 16(2), which outlines the eligibility criteria for Input Tax Credit (ITC), should supersede Section 16(4), which imposes time limitations for ITC claims. As such, if the conditions specified in Section 16(2) are met, the time limit under Section 16(4) for claiming ITC should become insignificant.
However, the High Court of Andhra Pradesh clarified that the two sections are distinct and should be treated as separate provisions.
The bench emphasised that Section 16(2) and Section 16(4) serve different purposes within the framework of the CGST Act.
The bench explained that Section 16(2) is a restrictive provision, outlining eligibility criteria for ITC and on the other hand, Section 16(4) imposes or sets a time limit for claiming ITC.
The court noted that the non-obstante clause in Section 16(2) does not nullify the time limitation stipulated in Section 16(4) of the CGST Act.
The bench clarified that compliance with both these sections is necessary for businesses to avail ITC under the CGST Act and brought clarity to the intricate interplay of these sections.
Since these provisions aren’t contradictory, the non-obstante clause in Section 16(2) doesn’t override Section 16(4). The court emphasized that the legislative intent wouldn’t have required Section 16(4) if it were meant to be overridden by Section 16(2).
In conclusion, the division bench comprising Justice U. Durga Prasad Rao and Justice T. Mallikarjuna Rao dismissed the writ petition emphasising the interpretation and application of Section 16(2) and Section 16(4) of the CGST Act and thus resolved the complexities surrounding these Sections.
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