Validity of Section 16(2)(c) of the CGST Act/WBGST Act

Case Law Details

Case Name : M/s. LGW Industries Limited & ors. Vs. Union of India & ors. (Calcutta High Court)

Appeal Number : W.P. 23512(W) of 2019

Date of Judgement/Order : 08/01/2020

Related Assessment Year :

Courts : All High Courts Calcutta High Court Kolkata High Court

LGW Industries Limited & ors. Vs. Union of India & ors. (Calcutta High Court)

Hon’ble Calcutta High Court has issued notice to Centre and State Government on 08.01.2020 in the matter of LGW Industries Ltd. Vs UOI & others, W.P. No. 23512 (W) of 2019, wherein the petitioner has challenged the constitutional validity of Section 16(2)(c) of the CGST Act/WBGST Act, which seeks to deny ITC to a buyer of goods or services, if the tax charged in respect of supply of goods or services has not been actually paid to the Government by the supplier of goods or services. The petitioner has also challenged the demand of reversal of ITC along with interest only on the basis of allegation that registration has been obtained by some of the supplier of goods on the basis of fake identity proofs and that none of the supplier is found in their Principal Place of business.

The matter was argued by Advocate Vinay Shraff with Advocate Rajarshi Chatterjee and Advocate Himangshu Ray on the ground that denying ITC to a buyer of goods and services would tantamount to treating both the ‘guilty purchasers’ and the ‘innocent purchasers’ at par whereas they constitute two different classes. The petition further stated that denying ITC to a buyer of goods or services for default of the supplier of goods or services would tantamount to shifting the incidence of tax from the supplier to the buyer, over whom it has no control whatsoever, is arbitrary and irrational & therefore violative of the Article 14, Article 19(1)(g) and Article 300A of the Constitution of India. It would also clearly frustrate the underlying objective of removal of cascading effect of tax as stated in the Statement of object and reasons of the Constitution (One Hundred And Twenty-Second Amendment) Bill, 2014. On the second issue in the petition, it was stated that in the absence of any finding about petitioners mala fide intention, connivance or wrongful association with the suppliers, no liability can be imposed on it on the principle of vicarious liability on account of fraudulent conduct of the suppliers, who have obtained registration on the basis of fictitious documents.

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Tags: Goods And Services Tax, GST, high court judgments

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Author Bio

Name: Himangshu Kumar Ray, Advocate,

Qualification: LL.B / Advocate

Company: Himangshu Kumar Ray

Location: Kolkata, West Bengal, India

Member Since: 20 Jan 2020 | Total Posts: 12

I am practicing before Hon'ble Calcutta High Court, Calcutta and Circuit Bench at Jalpaiguri. Appearing in Direct Tax, Indirect Tax and other Writ matters related to Non-Revenue. View Full Profile