Case Law Details
Vinod Udaipuri Vs Union of India (Jharkhand High Court)
The Jharkhand High Court disposed of the writ petition filed by Vinod Udaipuri Vs Union of India, which challenged the constitutional validity of Section 16(4) of the Central Goods and Services Tax (CGST) Act, 2017, and sought to quash an order disallowing Input Tax Credit (ITC).
The Core Issue
The petitioner sought to challenge the disallowance of Rs. 30,29,010 in ITC for the period July 2018 to March 2019, imposed along with interest and an equal penalty. The disallowance was based on the petitioner’s alleged violation of §16(4), which sets a time limit for availing ITC. The petitioner also challenged the constitutional validity of §16(4) and the retrospective validation of GSTR-3B as a return under Rule 61(5).
Impact of the Finance Act, 2024
During the proceedings, counsel for both the petitioner and the Union of India submitted that the matter required a fresh adjudication due to the insertion of a new provision: Section 16(5) of the CGST Act, 2017, via Section 118 of the Finance Act, 2024.
This new sub-section was made retrospectively effective from July 1, 2017. Crucially, §16(5) provided a non-obstante clause stating: “Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.”
Court’s Holding and Direction
The High Court observed that the initial disallowance was made without considering the extended time limit now stipulated under the newly inserted §16(5). Since the new retrospective provision directly impacted the legality of the original order by providing a grace period for availing ITC (up to November 30, 2021), and both parties consented to a re-evaluation, the Court held that the matter must be decided afresh.
The Jharkhand High Court, therefore, quashed and set aside the original Order-in-Original dated May 19, 2023, and the consequential Summary of Order. The matter was remitted to the authority to pass a fresh order, specifically taking into consideration the implication of §16(5) of the CGST Act. The authority was directed to take a decision within two months. The court clarified that it had not entered into the merits of the constitutional challenges.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
1. The instant writ petition has filed under Article 226 of the Constitution of India seeking therein following reliefs:-
i. For issuance of an appropriate writ/order/direction for declaring Section 16(4) of the Central Goods and Services Tax Act, 2017 (Annexure-4) as ultra vires, in as much as it seeks to impose a time limit for the availment of Input Tax Credit being violative of Article 14, Article 19(1)(g) and Article 300A of the Constitution of India and also being violative of the basic structure of the Central Goods and Services Tax Act, 2017.
ii. For issuance of further appropriate writ/order/direction for declaring the amendment carried under Rule 61(5) of the Central Goods and Services Rules, 2017 inserted vide Clause 4(a) of Notification No. 49/2019 dated 9th October, 2019, issued by Respondent No.-2 Central Board of Indirect Taxes and Customs (Annexure-7) as ultra vires, under which GSTR-3B has been declared to be a valid return under Section 39 of the Central Goods and Services Act, 2017 with retrospective effect from 01.07.2017, as being wholly violative of Article 14, Article 19(1)(g) and Article 300A of the Constitution of India as it has an effect of interfering with the vested right of the Petitioner to avail Input Tax Credit.
iii. For issuance of further appropriate writ/order/direction for quashing/setting aside the Order-in-Original No. 45/GST/DC/OIO/RND/2023-24 dated 19.05.2023 (Annexure-3) and consequential Summary of Order in GST DRC-07 dated 25.08.2023 (Annexure-3/1) passed by Respondent No. 4 pertaining to the period July, 2018 to March, 2019, wherein an amount of Rs. 30,29,010/-availed as Input Tax Credit for discharging its output tax liability under Section 16(4) of the Central Goods and Services Tax Act, 2017 has been disallowed and demand of the said amount along with interest under Section 50 of the Central Goods and Services Tax Act, 2017 and equal amount of penalty under Section 122(2)(a) of the of the Central Goods and Services Tax Act, 2017 have been imposed against the Petitioner.
2. Mr. Sumeet Gadodia, learned counsel for the petitioner, has submitted that in view of the provision of Section 118 of the Finance Act, 2024, the matter needs to be decided afresh and as such, the impugned Order-in-Original and Summary of Order may be quashed and set aside so that matter be decided, on remand, afresh.
3. Learned counsel for respondents Mr. Amit Kumar, on instructions, has submitted that in view of the provision as inserted in the Finance Act, 2024 as under Section 118 thereof, the matter needs to be adjudicated afresh.
4. We have heard the learned counsel for the parties and have considered the demand raised on account of the violation of Section 16(4) of the JGST Act as would be evident from paragraph-5 of the impugned order.
5. It is evident that the Gazette Notification has been issued on 16.08.2024 by inserting sub-section (5) under Section 16 of the CGST Act w.e.f. 1st day of July, 2017 after sub-section (4). For ready reference, the said insertion is being referred as under:
“118. In section 16 of the Central Goods and Services Tax Act, with effect from the 1st day of July, 2017, after sub-section (4), the following sub-sections shall be inserted, namely:––
“(5) Notwithstanding anything contained in sub-section
(4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017- 18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.
….”
6. It is evident that the insertion of the aforesaid provision has been made effective from the 1st day of July, 2017, whereby and whereunder, it has been provided that “Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017- 18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021”.
7. It is, thus, evident that the decision which has been taken as impugned in the present writ petition was in absence of the consideration by following the stipulation made in sub-section (5) of Section 16 which has been made effective w.e.f. 1st day of July, 2017.
8. The Union, due to the aforesaid reason, is consenting for adjudication of the issue afresh.
9. Considering the implication of insertion of sub-section (5) under Section 16 of the CGST Act, this Court is of the view that the matter needs to be considered afresh.
10. Accordingly, the impugned Order-in-Original dated 19.05.2023 and Summary of Order dated 25.08.2023 is quashed and set aside.
11. The matter is remitted before the authority to pass afresh order taking into consideration the implication of sub-section (5) of Section 16 of the CGST Act.
12. Let the decision be taken, in accordance with law, within a period of two months from the date of receipt/production of copy of this order.
13. It is made clear that this Court has not entered into the merit of the case.
14. With the aforesaid observations and directions, this writ petition stands disposed of.
