Constitutional validity of Section 16(4) of CGST Act challenged

Jyote Motors Bengal Private Limited & Anr Vs Additional Director, DGGI (Calcutta High Court)

In the case of M/s. Jyote Motors Bengal Pvt. Ltd. v. Additional Director, Directorate General of Goods & Service Tax Intelligence [W.P.A. No. 8784 of 2023 dated May 18, 2023], the esteemed Calcutta High Court instructed Jyote Motors Bengal Pvt. Ltd. (“the Petitioner”) to deposit 10% of the contested tax amount within a two-week timeframe. This payment condition was set to allow the court to consider the writ petition. Furthermore, the court instructed the Revenue Department to refrain from any forceful actions, provided the required payment is completed within the specified period.

Facts:

The Petitioner has challenged the appealable order before the Calcutta High Court challenging Section 16(4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Issue

Whether Section 16(4) of the CGST Act is constitutionally valid?

Held

The Hon’ble Calcutta High Court in W.P.A No. 8784 of 2023 held as under:

• Observed that, the Petitioner has challenged the appealable orders which were passed by the Revenue Department dated January 19, 2023.
• Noted that, since the writ involves pure question of law i.e., the constitutional validity of Section 16(4) of the CGST Act.
• Stated that, the writ will be entertained only if the Petitioner makes payment of 10% of the disputed tax amount within two weeks.
• Directed the Revenue Department not to take any coercive action if the payment is made within the stipulated time period.
• Further, directed the Revenue Department to file an affidavit-in-opposition after the summer vacation and subsequently directed the Petitioner to file a reply to the affidavit within two weeks thereafter.
• Listed the matter for final hearing in August 2023.

Relevant provision

Section 16(4) of the CGST Act:

“(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

Heard learned Advocates appearing for the respective parties.

By this writ petition, petitioners have challenged the legality and validity of the impugned order in original dated 19t^h January, 2023, passed by the respondent authority concerned under the CGST Act. Though the aforesaid impugned order is an appealable order under the statute but since pure question of law involving interpretation of Section 16(4) of the CGST Act, is involved and considering the judgment dated 22^nd April, 2016, of the Hon’ble Supreme Court relied upon by the learned Advocate appearing for the petitioners in the case of Aircel Ltd. vs. Commercial Tax Officer, in Writ Petition (Civil) Nos. 1055 and 1057 of 2013, reported in MANU/SC/0851/2016, this writ petition is being entertained on condition of making payment of 10% of the disputed tax amount of Rs.2,26,74,585/- within two weeks from date. If such payment is made within the time stipulated herein, no coercive action for recovery of the demand arising out of the impugned order in original shall be taken by the respondents. In case of failure to make payment within the time stipulated herein, this interim order will not have any force.

Respondents are directed to file affidavit-in-opposition within four weeks after the summer vacation. Petitioners to file reply thereto, if any, within two weeks thereafter.

List this matter for final hearing in the monthly list of August, 2023.

At the time of hearing, parties should be ready with the short written notes of arguments.

It is recorded that though the petitioners have made prayer challenging the Constitutional validity of Section 16(4) of the aforesaid Act and the relevant Rules but have not pressed for the same.

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