Case Law Details
Tirupati Balaji Traders Vs Union of India (Kerala High Court)
Summary: In Tirupati Balaji Traders v. Union of India (July 24, 2024), the Kerala High Court upheld that the right to claim Input Tax Credit (ITC) under Section 16 of the CGST Act is conditional. Tirupati Balaji Traders contended that if ITC is denied to a purchasing dealer who has already paid the full tax to the supplier, it would undermine provisions under the CGST Act and the Insolvency and Bankruptcy Code (IBC). They argued that ITC should be claimable even if the supplier defaults on tax payment. However, the Court, referring to previous judgments, reiterated that ITC is a statutory benefit contingent on compliance with specified conditions, particularly requiring that the tax be paid to the government by the supplier. The Court also cited the M. Trade Links decision, affirming the validity of Sections 16(2)(c) and 16(4) of the CGST Act, which enforces time limits and compliance conditions for ITC claims. Additionally, it referenced the ongoing Supreme Court challenge to Section 16(4) in Shanti Motors v. Union of India. This ruling aligns with prior judgments, solidifying that purchasing dealers can only claim ITC if the supplier has fulfilled the tax payment obligations. Consequently, the petition by Tirupati Balaji Traders was dismissed, reinforcing the conditional nature of ITC under GST law.
Introduction: The Hon’ble Kerala High Court in the case of Tirupati Balaji Traders v. Union of India [W.P. (Civil) No. 16259 of 2024 dated July 24, 2024] dismissed the writ petition relying on the judgment of M. Trade Links v. Union of India [W.P. (C) NO. 31559 of 2019 dated June 04, 2024].
M/s Tirupati Balaji Traders (“the Petitioner”) contended that if an interpretation is placed on the provisions of Section 16(2)(c) of the Central Goods and Services Tax, 2017 (“the CGST Act”) that would deny Input Tax Credit (“ITC”) to a purchasing dealer who has paid the entire amount of tax to the supplying dealer, the same would render otiose the provisions of Sections 75(12), 76, 79, 82, 83 and 88 of the CGST Act and the Insolvency and Bankruptcy Code, 2016, (“IBC Code”), the right to avail ITC is a conditional right, the Petitioner cannot be given the benefit of ITC unless the amount of tax collected from the Petitioner has actually been paid to the exchequer.
The Petitioner further relied on a Division Bench of this Court in Nahasshukoor v. Asstt. Commissioner [2024] 81 G.S.T.L. 384 [Ker.], where this Court held that the ITC is in the nature of a benefit or concession conferred under the statute. It is up to the purchasing dealer to avail of the said benefit/concession following those conditions.
However, the writ petition failed and was dismissed.
Our Comments:
The Hon’ble Kerala High Court in M/s. M. Trade Links v. Union of India [Supra] has upheld the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST/SGST Act. After acknowledging the difficulties during the initial implementation years of GST, this Court has relieved the Petitioners by retrospectively extending the time limit to avail ITC to November 30 from the FY 2017-18 onwards.
It must be noted that the vires of Section 16(4) of the CGST Act is currently under challenge in the Hon’ble Supreme Court of India in the case of Shanti Motors v. Union of India [SLP(C) No. 4410 of 2024] alongside other SLPs.
Also, it must be noted that in the case of Thirumalakonda Plywoods v. Assistant Commissioner [W.P. No. 24235 of 2022 dated July 18, 2023], the return in FORM GSTR 3B for the period March 2020 was filed on November 27, 2020, and no relief was provided by the Hon’ble Andhra Pradesh High Court.
The relief given in the present writ petition would be infructuous for the purpose of ITC availment for FY 2017-18 wherein the time limit to avail ITC for the FY 2017-18 had been extended vide Order No. 2/2018 dated December 31, 2018, till March 31, 2019, instead of the November 30 of the next FY that has been prescribed in the present ruling at hand.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The issues raised in this writ petition are substantially covered against the petitioner by a judgment of a learned Single Judge of this Court in M. Trade Links v. Union of India [2024 KLT OnLine 1624]. I am in respectful agreement with the view taken by this Court in M. Trade Links (Supra).
2. Though the learned counsel appearing for the petitioner has extensively argued that if an interpretation is placed on the provisions of Section 16(2)(c) of the Central Goods and Services Tax/State Goods and Services Tax Act, 2017 (CGST/SGST Act) that would deny input tax credit to a purchasing dealer who has paid the entire amount of tax to the supplying dealer, the same would render otiose the provisions of Sections 75(12), 76, 79, 82, 83 and 88 of the CGST/SGST Act and in the facts and circumstances of this case the Insolvency and Bankruptcy Code, 2016, I find that since the right to avail input tax credit is a conditional right, the petitioner cannot be given the benefit of input tax credit unless the amount of tax collected from the petitioner has actually been paid to the exchequer. I am fortified in taking the above view in the light of the observations of a Division Bench of this Court in Nahasshukoor v. Assistant Commissioner and Others; 2023 SCC OnLine Ker 11369, where this Court held as follows:
“ xxxx xxxx xxxx
As stated already, the input tax credit is in the nature of a benefit or concession conferred under the statute. The impugned provisions prescribe certain conditions for the purchasing dealers to avail of the benefit. It is up to the purchasing dealer to avail of the said benefit/concession following those conditions.
xxxx xxxx xxxx”
In the light of the above, the writ petition fails and it is accordingly dismissed.
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