LI Network
Published on: December 15, 2023 at 13:53 IST
The Calcutta High Court recently addressed the issue of Input Tax Credit (ITC) under Section 16(1) of the GST Act, emphasizing that it becomes a vested right only when the conditions stipulated for its availment are fulfilled.
The bench, consisting of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, observed that Section 16(2) should not be construed as a provision allowing ITC; rather, it is Section 16(1) that serves as the enabling provision, with Section 16(2) imposing restrictions on credit for dealers who meet the prescribed conditions.
The case involved a writ petitioner seeking the department’s direction to refund alleged excess tax recovery and a prohibition on further coercive action.
The court’s order, passed under Section 107 of the Central Goods and Services Tax Act, 2017, and the West Bengal Goods and Services Tax Act, 2017, denied ITC to the appellant for returns filed beyond the statutory time limit specified in Section 16(4) of the GST Act.
A show-cause notice was issued, and despite the appellant’s request for an extension, the order directed payment of tax, penalty, and interest. The appellant, failing to comply, had the amount debited from the ledger.
The appellate authority later confirmed the order, asserting that the appellant, having availed ITC beyond the specified time limit, was not entitled to it.
The court considered the appellant’s argument that Section 16(4) cannot override the scheme of the statute, as it renders the non-obstante provision (Section 16(2)) meaningless.
The appellant contended that entitlement to a right occurs after fulfilling conditions, and the act of “taking” or “availing” that right through procedural formalities is a matter of choice.
The respondent countered, stating that the non-obstante clause in Section 16(2) does not limit the operation of Section 16(3) or Section 16(4); they complement each other, restricting and limiting the scope of Section 16(4).
The court concluded that Section 16(4) constitutes a condition making a registered person entitled to ITC. It clarified that Section 16(2) does not violate Article 300A of the Constitution of India and that the non-obstante clause does not limit the operation of Section 16(4).
Case Title: BBA Infrastructure Limited Versus Senior Joint Commissioner Of State Tax And Others,
