The Gauhati High Court has kept the constitutional validity of CGST Rule 36(4). The provision specifies documentary needs and conditions for a registered person claiming input tax credit (ITC).
It was noted by the division bench of Chief Justice Vijay Bishnoi and Justice N. Unni Krishnan Nair that the provision was legislated based on the authority derived from Section 16 of the CGST Act and the general rule-making powers under Section 164, not from the unenforced Section 43A.
The applicant is in the business of rendering the works contract service and has contested the rule based on the fact that it was legislated drawing the power from Section 43A(4) of the CGST Act (inserted vide CGST (Amendment) Act, 2018), which never came into effect.
It mentions that as the effective implementation date of section 43A was never reported and as it was omitted w.e.f 1.10.2022, it is apparent that Rule 36(4) of the CGST Rules has no constitutional or legal validity before 01.01.2022.
The revenue claimed that the provision would come into force when the CGST (Amendment) Act, 2018 was notified.
It was provided that the validity of rule 36(4) has already been upheld by a Division Bench of the Kerala High Court in Nahasshukoor VS. Assistant Commissioner, Second Circle, State Goods & Service Tax Department, Colletorate & Ors. (2023).
The applicant resisted the same contention by citing that the decision of the Kerala High Court was based on an examination of Article 14 whereas its challenge was grounded on incompetence as of the non-enforcement of section 43A.
HC at the outset considered with the applicant that Section 43A was never legislated. It noted that Section 1(2) in the CGST (Amendment) Act, 2018, whereby Section 43A was legislated, given that the provisions will be effective on such date, the Central Government may, by Notification, in the Official Gazette, appoint.
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“Learned counsel for the Revenue has failed to satisfy this Court that the Central Government, by Notification in the Official Gazette, has appointed a date from which Section 43A has been enforced till the date it was omitted by the Finance Act, 2022, i.e. from 01.10.2022. In such circumstances, it can be concluded that Section 43A has never come into operation because the Central Government has never notified any date for its enforcement till it was omitted,” the Court cited.
HC was of the view that rule 36 is not appropriate to section 43A. Instead, it discovered the rule is appropriate to section 16 of the CGST Act only.
“In our view Section 16 of the CGST Act and Rule 36 of CGST Rules are in relation to eligibility of a registered person who can avail input tax credit by furnishing required documents, whereas Section 43A of the CGST Act is defining procedure for furnishing returns for availing input tax credit. Needless to say that the eligibility conditions and requirement of documents for availing input tax credit is distinct from the procedure of furnishing return for availing said benefit,” the Court noted.
It said that rule 36 is mentioned under the objects of the CGST Act and comes within the extent of general authority provided via section 164(2).
It was mentioned under section 164 that the central government may create rules for all or any of the cases that are mandated via the CGST Act.
Consequently, the challenge to the Rule was rejected.
Appearance: For the applicant: Mr. V. Shraff, Advocate. Ms. B. Podder, Advocate. For the Respondent(s): Mr. S.C. Keyal, Standing Counsel, CGST. Ms. N. Kakati, Advocate.
| Case Title | M/S High Tech Ecogreen Contractors LLP V/S Joint Director, DGGI |
| Citation | WP(C)/4787/2024 |
| Date | 25.02.2025 |
| Counsel For Appellant | Mr. V. Shraff, Advocate and Ms. B. Podder, Advocate. |
| Counsel For Respondent | Mr. S.C. Keyal, Standing Counsel, CGST, Ms. N. Kakati, Advocate. |
| Gauhati High Court | Read Order |
