The Calcutta High Court upheld the constitutionality of Section 16(4) of the Central Goods and Services Tax Act, 2017, emphasizing the importance of adhering to time limits for filing Goods and Services Tax Returns over the legal right to claim Input Tax Credit (ITC).
The order in appeal on 04.01.2023 is been contested by the petitioner asking for the directive to refund Rs 28,63,680 alleged the excess tax recovery. The writ petition has the objective to prevent additional action via respondents.
The impugned order, under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST) and West Bengal Goods and Services Tax Act, 2017 (WBGST), declined an Input Tax Credit of Rs.28,65,780 for Nov ’18 to Mar ’19, quoting late filing beyond the statutory time limit of Section 16(4) of the GST Act (expired on 20.10.2019).
The petitioner asked for an extension dated 04.01.2021, and the second respondent ordered tax payment, penalty, and interest, quoting the legal timeframe for ITC claims.
Despite reminders, the appellant did not follow, and on 11.09.2021, the department debited the amount. The appellant appealed, but on date 04.01.2023, the first respondent kept the order, noting the appellant surpassed the ITC time limit (20.10.2019).
The Division Bench of Calcutta High Court presided over by Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya heard Vinay Shraff, Advocate appearing for the appellant, assisted by Priya Sarah Paul, advocate for the appellant, and T.M. Siddiqui, Additional Government Pleader assisted by T. Chakraborty and S Sanyal for the respondent department.
The case of the petitioner was that they submitted the GST returns filing form in GSTR-3B for the duration from November 2018 to Match 2019 on 20.10.2019 which is beyond the last date of submission of the return for September 2019.
The council contends that the returns that are required to get filed beyond the legal time limit that the petitioner is not qualified for the ITC and therefore he is required to reverse the credit opted and has intentionally misstated the particulars and claimed the advantage which is obligated for filing the penalty.
The appellant argues that Input Tax Credit isn’t claimed via the return but is instead taken through immediate entry in the books of account upon receiving goods and services, as per the first proviso to Section 16(2) of the GST Act.
They contend that Section 16(4)’s time limit shouldn’t nullify the statute’s framework. Operating under Section 16(4) renders the non-obstante provision of Section 16(2) meaningless.
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In essence, they assert that Section 16(2) holds supremacy over Section 16(4), evident in the statute’s language of being “entitled to take credit.” Therefore, according to the appellant, the entitlement to a specific right is achieved upon meeting specified conditions, and the action of “taking,” “availing,” or “utilizing” that right through procedural formalities or return filing is at the discretion of the entitled person.
Additionally, the appellant argued that Section 16(1) of the GST Act lacks any explicit mention of time limits or elements and doesn’t visibly connect Sub-section (1) to Sub-section (4) of Section 16 in the Goods and Services Tax Act.
The revenue, represented by the respondents, aimed to uphold the authorities’ orders by arguing that the statute should be understood in its entirety, emphasizing that exception clauses like non-obstante clauses shouldn’t be interpreted independently from the primary enacting provision.
Their submission highlighted the importance of discerning the intended purpose behind a non-obstante clause, emphasizing that it serves to override contrary provisions rather than complementary ones.
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The revenue asserted that Section 16’s language is explicit: the non-obstante clause in Section 16(2) doesn’t limit Section 16(3) or Section 16(4) in any way. Instead, these sections, intended to confine provisions, essentially complement each other and constrain the scope and application of Section 16(4).
Moreover, they argued that legislative intent doesn’t render Section 16(4) redundant through the application of Section 16(2). Reading Sections 16(2)(d) and 16(4) together clarifies that entitlement to credit for Input Tax related to any supply of goods or services arises after the filing of a return under Section 39 of the Act.
The Bench noted that in the TVS Motor Company Limited case, the Hon’ble Supreme Court referenced the ALD Automotive decision, affirming that Input Tax Credit (ITC) is a form of concession under the Act.
It cannot be demanded as an inherent right but is claimable only as per statutory provisions, requiring the fulfilment of specified conditions by the dealer.
Additionally, the Calcutta High Court Division Bench remarked on a recent case similar to the one at hand, where the High Court of Andhra Pradesh examined a provision under the Andhra Pradesh General Sales Tax, 2017, analogous to Section 16(4) of the Act.
This case challenged its validity on constitutional grounds (Article 14, 19(1)(g), and 300A of the Indian Constitution) and pondered the supremacy of the non-obstante clause in Section 16(2) of the APGST/CGST Act, 2017 over Section 16(4).
The Court observed that the arguments presented by the appellant’s advocate mirrored those made by the petitioners/assessee in the mentioned case. However, the Court rightly rejected them, stating that Section 16(2) outlines mandatory eligibility criteria, emphasizing that non-compliance with these criteria disqualifies the dealer from claiming ITC.
Consequently, the Calcutta High Court found no grounds to grant the relief sought in the writ petition and thus dismissed both the appeal and the writ petition.
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This recent ruling by the Calcutta High Court solidifies the legal precedent regarding the predominance of ITC provisions over return filing time limits. By upholding the constitutional validity of Section 16(4) of the Goods and Services Tax Act, the Court reiterated the necessity of adhering to statutory time limits when claiming Input Tax Credit.
The Division Bench, comprising Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya, underscored that ITC is a concession provided by the Act, not an absolute entitlement, and stressed the mandatory nature of meeting eligibility criteria in their judgment.
| Case Title | M/S. BBA Infrastructure Limited |
| Citation | MAT NO. 1099 OF 2023 With (I.A. NO. CAN 1 OF 2023) |
| Date | 13.12.2023 |
| Counsel For Appellant | Mr. Vinay Shraff, Advocate, Ms. Priya Sarah Paul, Advocate. |
| Counsel For Respondent | Mr. T.M. Siddiqui, Ld. Additional Government Pleader, Mr. T. Chakraborty, Advocate, Mr. S. Sanyal, Advocate. |
| Calcutta HC | Read Order |