Megha Engineering and lnfrastructure Limited Vs Union of lndia (Telangana High Court)
Section 16(2)(c) is under challenge primarily on the ground that it imposes an onerous and disproportionate burden on the recipient by making the entitlement to input tax credit contingent upon the supplier’s compliance in remitting tax to the Government—an aspect entirely beyond the recipient’s control. Such a condition effectively penalizes a bona fide purchaser despite full payment of consideration along with tax, thereby leading to manifest arbitrariness and violation of Articles 14 and 19(1)(g) of the Constitution of India. It is further contended that the provision, as interpreted and enforced, reverses the fundamental scheme of GST as a consumption-based tax and undermines the seamless flow of credit, while also resulting in double taxation in cases where tax has already been collected but not deposited by the supplier
One of the biggest challenges under Section 16(2)(c) is the denial of ITC to recipients due to supplier default. This issue is now being examined by the Telangana High Court in a batch of writ petitions.
The issue is presently under consideration before the Telangana High Court in a batch of writ petitions (W.P. Nos. 6880, 6883, 6897, 6899, 6903 and 6933 of 2025), wherein similar action of the Department has been questioned. The Hon’ble Court, having taken cognizance of the prima facie illegality in proceeding directly against the recipient, has been pleased to direct that no coercive action shall be taken pursuant to the impugned orders, thereby reinforcing the settled position that recovery must first be attempted from the supplier except in exceptional circumstances.
