Section 16(4) of CGST Act is constitutionally valid and binding on taxpayer to avail ITC: High Court

Petitioner seeks to challenge the constitutional validity of Section 16(4) of the CGST Act as violative of Articles 14, 19(1)(g) & 300A of the Constitution of India and further seeks a declaration that Section 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Sections 16(1) & 16(2) of the CGST Act, and eventually seeks to challenge the show cause notice and to allow the ITC (Input Tax Credit) claimed in the month of March, 2019 and also to quash the proceedings initiated under Section 16(4) of the CGST Act by respondents No. 3 to 5 herein.

Relevant Facts:

Petitioner for the FY 2018-19 filed return under Section 39 of the CGST Act in Form GSTR-3B for the month of March, 2019 on 13-11-2019. Return was specifically filed for the specified period and late fees was also paid in accordance with Section 47 of the CGST Act for the period March, 2019 in Form GSTR-3B of April, 2019 and interest under Section 50 was also paid in the return for the period March, 2019.

The ITC claimed in the return for the month of March, 2019 was eligible ITC for the specified period in terms of Section 16(2).

Thereafter, the petitioner was served with a demand letter dated 6-2-2020 by respondent demanding an amount of Rs.9,43,919/- to be paid alleging that Input Tax Credit (ITC), as specified above, is availed in contravention of Section 16(4) of the CGST Act along with interest under Section 50 of the said Act, which the petitioner replied and prayed for quashment of the proceedings and not to issue any further notice, but respondent again issued a demand letter dated 28-1-2021 rejecting the grounds raised by the petitioner stating that Section 16(4) provides for condition of availing ITC and accordingly demanded the payment of wrongly availed ITC along with appropriate interest, which the petitioner again replied that he satisfies all the requirements of Section 16(2) of the CGST Act, but not satisfied with that, the petitioner was served with a show cause notice alleging that the petitioner has wrongly availed ITC for the month of March, 2019 by contravening with the provisions of Section 16(4) read with Section 39 of the CGST Act and Rule 61 of the CGST Rules.

The petitioner was required to show cause as to why total goods and services tax amounting to Rs.9,43,920/- should not be demanded and recovered from him under Section 73(1) of the CGST Act, interest at applicable rate should not be demanded and recovered under Section 50 of the said Act and penalties should not be imposed under Section 73(9) of the said Act leading to filing of the instant writ petition questioning the constitutional validity of Section 16(4) of the CGST Act and eventually questioning the proceedings initiated for recovery of Rs. 9,43,920/- along with interest and penalties stating that the said recovery under Section 16(4) is violative of Articles 14, 19(1)(g) & 300A of the Constitution of India and that Section 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Section 16(1) & 16(2) and further called in question the recovery proceedings initiated in shape of show cause notice.

Revenue:

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Input Tax Credit

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GSTR-3B

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