Case Law Details
OSL Securities Limited Vs Union of India & others (Orissa High Court)
Introduction: In a significant legal development, the Orissa High Court granted an interim stay in the case of OSL Securities Ltd. v. Union of India [W.P. (C) No. 2695 OF 2024 dated February 06, 2024], where the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act) was challenged. This article delves into the facts, legal provisions, and implications of this judicial intervention.
Facts:
OSL Securities Ltd. (“the Petitioner”), filed a writ petition against order dated December 27, 2023, (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) under Section 73 of the CGST Act, thereby, challenging the vires (validity) of the clause (c) of sub-section (2) of Section 16 of the CGST Act The Impugned Order was issued by the Respondent on the ground that the supplier had not shown the transaction with the Petitioner in Form GSTR-3B and tax has been paid by the Petitioner on the supply received.
Held:
The Hon’ble Orissa High Court in Writ Petition. (C) No. 2695 OF 2024 granted interim stay in favour of the Petitioner, thereby holding that, no coercive action should be taken during the pendency of writ petition subject to deposit of 20 percent of the amount of tax payable.
Relevant Provision:
Section 16(2)(c) of the CGST Act:
“Section 16: Eligibility and conditions for taking input tax credit.
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and”
Conclusion: The Orissa High Court’s interim stay in the case of OSL Securities Ltd. v. Union of India marks a significant development in the legal battle surrounding Section 16(2)(c) of the CGST Act. By restraining coercive action and granting relief to the petitioner pending constitutional scrutiny, the court has upheld principles of fairness and justice. This case underscores the judiciary’s role in interpreting and safeguarding constitutional rights, ensuring equitable application of tax laws. As the case progresses, its outcome will have broader implications for taxpayer rights and legal interpretations in the realm of indirect taxation.
This matter is taken up through hybrid mode.
2. The petitioner by way of filing the writ petition has challenged the vires of Clause (c) of Sub-section (2) of Section 16 of the Odisha Goods and Services Tax Act, 2017 (in short, “the OGST Act”)/ Central Goods and Services Tax Act, 2017 (in short, “the CGST Act”) which provides for a registered person is entitled to credit of input tax, if the tax charged in respect of supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply. The petitioner, therefore, challenged the order dated 27.12.2023 passed by Assistant Commissioner of State Tax, Cuttack-1, Central Circle under Section 73 of the CGST/OGST Act raising a demand to the tune of Rs. 11,56,818.00, comprising tax of Rs.5,45,204/-, interest of Rs.5,57,094.00 and penalty of Rs.54,520.00 with respect to tax periods July, 2017 to March, 2018.
3. It is contended by Mr. Jagabandhu Sahoo, learned senior counsel appearing for the petitioner that by invoking provisions of Section 73 of the OGST/CGST Act, the petitioner has been assessed to tax for the tax period from July, 2017 to March, 2018 on the ground that the supplier has not shown the said transaction in its Form-GSTR-3B. It is further submitted that it is inconceivable that for the default on account of supplier, the Petitioner-recipient, who has already suffered tax can be saddled with further levy of tax, interest and penalty.
4. Sunil Mishra, learned Standing Counsel appearing for the Revenue though made an attempt to convince the Court that there is availability of remedy of appeal under Section 107 of the OGST/CGST Act, since vires of the statutory provision has been challenged on the anvil of Articles 14 and 19(1)(c) read with Article 265 of the Constitution of India, he prayed to grant opportunity to file counter affidavit.
5. Issue notice to the opposite parties. One extra copy of the writ petition be served on Mr. P.K. Parhi, learned DSGI and three extra copies of the brief be served on Mr. Sunil Mishra, learned Standing Counsel appearing for the Revenue by tomorrow (07.02.2024) enabling them to obtain instruction in the matter and file counter affidavit.
6. As an interim measure, it is directed that the petitioner shall deposit 20% of the tax as determined vide assessment order dated 12.2023 passed under Section 73 of the OGST/CGST Act within a period of four weeks from today. In the event of such deposit, no coercive action shall be taken against the petitioner till disposal of the writ petition.
7. List this matter along with W.P.(C) No.13302 of 2022 on the date fixed therein.
Issue urgent certified copy as per rules.
****
(Author can be reached at info@a2ztaxcorp.com)
Author Bio
