Bombay HC issues notice in challenge to Constitutional validity of 16(4) of CGST Act

Meta Tiles Pvt. Ltd. Vs Union of India (Bombay High Court)

Hon’ble Bombay High Court issues notice in challenge to Constitutional validity of 16(4) of the CGST Act

In terms of section 16(4) of the Central GST Act and Maharashtra GST Act, a taxpayer is not entitled to take input tax credit in respect of any invoice after the due date of furnishing of the return for the month of September following the end of financial year to which such invoice pertains; or furnishing of the relevant annual return, whichever is earlier.

Meta Tiles Pvt. Ltd. has filed a writ petition vide W.P. (L) No: 12338 of 2021 before the Hon’ble Bombay High Court challenging the constitutional validity and vires of section 16(4) of the Central GST Act and Maharashtra GST Act. The petition is also praying for declaration of the conditions as prescribed in Section 16(4) of the Act as merely procedural in nature which cannot override substantive conditions as mandated under Section 16(1) and Section 16(2) of the Act.

The petition is also challenging the constitutional validity of the retrospective amendment of Rule 61 of the CGST / MGST Rules.

Further, the petition is also praying for declaration of return required to be furnished in Form GSTR- 3B as an incomplete, non est and invalid return in the eye of law.

Hon’ble Bombay High Court vide its Order dated October 29, 2021 has issued notice to the Central and State Government to file affidavit-in-reply by three weeks and to file rejoinder thereto, if any, by one week thereafter. The matter is listed for hearing on 3^rd December, 2021.

It was submitted that if the restriction under Section 16(4) of the Act is invoked and ITC is denied then the ‘non-obstante clause’ in Section 16(2) of the Act would cease to have any meaning or purpose and would be rendered otiose. It was further submitted that ITC is not taken through return but instead it is taken through the books of accounts immediately on receipt of goods or services in terms of 1^st proviso to Section 16(2) of the Act.  It was also submitted that the provision of section 16(4) of the CGST Act, 2017/ MGST Act, 2017 is arbitrary and unreasonable as they are violative of Article 14. Further they are also violative of Article 19(1)(g) and Article 300A of the Constitution and the denial of ITC would defeat the object of the 122^nd Constitutional Amendment Bill, 2017 to avoid the cascading effect of taxes.

This matter was represented on behalf of the petitioners by Advocate Vinay Shraff a/w Advocate Nikita Agarwal i/by Advocate Nikhil K. Rungta. The respondents were represented by Advocate J.B. Mishra and Advocate Jyoti Chavan, AGP for State.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Respondents may file affidavit-in-reply by three weeks; rejoinder thereto, if any, may be filed by one week thereafter.

2. List the writ petition on 3rd December, 2021.