Maruti Enterprise Through Its Authorized Partner Vs Union of India & Ors. (Gujarat High Court)
The Gujarat High Court examined a batch of petitions challenging the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017, which mandates that input tax credit (ITC) can be availed only if the tax charged on a supply has been actually paid to the Government by the supplier. The petitions arose from denial of ITC to purchasing dealers due to default by suppliers in depositing tax.
The petitioners contended that Section 16(2)(c) is arbitrary, discriminatory, and violative of Articles 14, 19(1)(g), 265, and 300A of the Constitution. Their primary argument was that once conditions under clauses (a), (aa), (b), and (ba) of Section 16(2) are satisfied—such as possession of invoice, reflection in GSTR-2A/2B, receipt of goods, and absence of restriction—the transaction is deemed genuine. Clause (c), which requires actual tax payment by the supplier, introduces a condition beyond the control of the purchaser, who has no statutory means to verify such payment. It was argued that treating bona fide purchasers and fraudulent or collusive dealers alike results in hostile discrimination. The petitioners further asserted that denial of ITC leads to double taxation and imposes an impossible burden on purchasers, invoking the principle that law cannot compel performance of impossibilities.
