ITC NOT ELIGIBLE FOR LATE RETURNS UNDER CGST ACT SECTION 16(4): CALCUTTA HC

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ITC NOT ELIGIBLE FOR LATE RETURNS UNDER CGST ACT SECTION 16(4): CALCUTTA HC

14/03/2024

ITC NOT ELIGIBLE FOR LATE RETURNS UNDER CGST ACT SECTION 16(4): CALCUTTA HC

CALCUTTA HIGH COURT

BBA Infrastructure Limited V/S Senior Joint Commissioner of State Tax and Others

Hon`ble Justice T.S. Sivagnanam and Hiranmay Bhattacharyya, JJ.

MAT NO. 1099 OF 2023, (I.A. NO. CAN 1 OF 2023)

13.12.2023

Facts leading to the filing of the writ petition are that a show-cause notice dated 28.10.2020 was issued to the appellant calling upon the appellant to explain as to why Input Tax Credit amounting to Rs. 28,64,780/- for the period from November, 2018 to March, 2019 should not be denied as returns for the FY 2018-19 were filed beyond the statutory time limit that is 29.10.2019.

The appellant by a representation dated 25.11.2020 requested for extension of time.

On 04.01.2021 the second respondent passed an order directing the appellant to pay tax, penalty and interest on the ground that the statute has set down a time frame within which a taxable registered person can claim ITC.

The appellant appears to have not paid the tax, penalty and interest as demanded and reminder was sent by the department on 06.09.2021 to deposit the entire dues on or before 10.09.2021. The appellant did not comply with the demand and consequently the department on 11.09.2021 debited the amount from the electronic cash ledger/ credit ledger of the appellant.

The appellant filed an appeal before the statutory appellate authority. On 07.05.2022 the appellant was intimated by the office of the appellate authority that they have not deposited any pre-deposit amount on the disputed demand of tax.

The appellant sent a reply on 01.06.2022 stating that the officer in-charge had initiated recovery proceedings and debited a sum of Rs. 11,62,099/- from the CGST Credit ledger and Rs. 11,34,291/- from the SGST credit ledger along with the interest from each cash ledger balances. The first respondent, the appellant authority by order dated 04.01.2023 confirmed the order passed by the second respondent holding that the statute has set a time frame within which the appellant can avail and utilize input tax credit and the appellant having done so beyond the time limit i.e. 20.10.2019 is not entitled for the ITC.

The appellant’s case is that they had submitted the returns in GSTR-3B for the period from November, 2018 to March, 209 on 20.10.2019 which is admittedly beyond the due date of submission of the return for the month of September, 2019.

The department’s Contention is that the returns having been filed beyond the statutory time limit the appellant becomes ineligible for Input Tax Credit and consequently he has to reverse the credit taken and having willfully mis-stated the particulars and availed the benefit they are liable to pay penalty.

The Contention of the appellant is that Input Tax Credit is not taken through the return but it is taken through the books of account immediately on receipt of goods and services in terms of first proviso to Section 16(2) of the GST Act.

Therefore, it is submitted that the time limit under Section 16(4) cannot supersede or override the scheme of the statute as operation of Section 16(4) makes the non-obstante provision namely Section 16(2) meaningless. In other words, it is contended that Section 16(2) has overriding effect on Section 16(4) as is evident from the words used in the statute, “entitled to take credit”. Thus, it is contended entitlement of a particular right after fulfilling the prescribed and specified conditions results into a right, “taking” or “availing” or “utilizing” that right through procedural formalities or furnishing a return by the person who is entitled to that right is a matter of his choice.

The argument advanced before us by the learned Advocate for the appellant were identical to that of the arguments which were placed by the petitioners/assessee in the said case and the same was rejected, in our view rightly on the ground that Section 16(2) prescribes, the eligibility criteria which is mandatory and in the absence of fulfillment of the eligibility criteria the dealer will not be entitled to claim ITC.

We are in the respectful agreement with the view expressed. The Contention that non obstante clause in the Sub Section(2) of Section 16 overrides the other provisions namely Section 16(4) was canvassed before the court which was also rightly rejected after taking note of the various decisions as to how the non obstante clause should be interpreted and rightly held that Section 16(2) does not appear to be a provision which allows Input Tax Credit, rather Section 16(1) is the enabling provision and Section 16(2) restricts the credit which is otherwise allowed to the dealers who satisfied the condition prescribed the interpretation given by the court that the stipulation in Section 16(2) is the restrictive provision is the correct interpretation given to the said provision.

A similar challenge was made to Section 16(4) of the Bihar Goods and Services Taxes Act, 2017 in the case of a Gobinda Construction wherein the court held that in the language of Section 16 does not suffer from any ambiguity and clearly stipulates grants of ITC subject to the condition and restriction put therein.

Further it was held that the right of registered person to take ITC under Section 16(1) becomes a vested right only if the conditions to take it are fulfilled, free of restriction prescribe under Sub Section (2) thereof.

Further the court held that the provision under Sub Section (4) of Section 16 is one of the conditions which makes a registered person entitled to ITC and by no means Sub Section (4) can be said to be violative of Article 300A of the Constitution of India. The court noted the decision in ALD Automotive Private Limited, Godrej and Boyce Manufacturing Private Limited and Jayam and Company and ultimately upheld the constitutional validity of Section 16(4) of the Act.

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