Shanti Motors vs. The Union Of INDIA

Held

The Patna High Court held that sub-section (4) of Section 16 of the CGST/BGST Act is constitutionally valid. The Court found no merit in the petitioners' arguments that the provision violates Article 19(1)(g) or Article 302 of the Constitution, or is in conflict with Article 13. The Court reasoned that fiscal legislation with uniform application cannot be considered violative of the freedom of trade and profession. Relying on Supreme Court judgments in ALD Automotive Private Limited and Jayam and Company, the Court emphasized that Input Tax Credit is a concession extended by the statute, and the conditions stipulated for its availment, including those in sub-section (4) of Section 16, must be strictly complied with. The Court rejected the submission to read down the provision as directory, stating that the clear language of Section 16 makes the fulfillment of conditions mandatory. Therefore, the Court concluded that the provision is not inconsistent with or in derogation of any fundamental right. The writ applications were dismissed.

Facts

Multiple petitioners, including Gobinda Construction, Shtrudhan Kumar Amit Kumar, Shiva Escorts, Komal Medical Agency, M/s Ram Kishun Saw Mill Trading and Company, Shanti Motors, Mrityunjay Kumar (M/s J.M.C.M. Sales Patna), Neelam Automobiles, and Nidhi Trading Company, filed writ petitions before the Patna High Court. These petitioners are business entities challenging provisions of the CGST/BGST Act related to Input Tax Credit (ITC). The specific challenge appears to be against the restrictions imposed on claiming ITC, particularly concerning the time limits for availing such credit. The respondents are various authorities of the Union of India and the State of Bihar, including the Ministry of Finance, Commissioners of CGST and State Tax, and Assistant Commissioners of State Tax.

Key Issues

1. Whether sub-section (4) of Section 16 of the CGST/BGST Act, which imposes conditions for claiming Input Tax Credit (ITC), is constitutionally valid and does not violate fundamental rights guaranteed under the Constitution of India? Petitioner's arguments: The petitioners contended that sub-section (4) of Section 16 of the CGST/BGST Act imposes unreasonable and disproportionate restrictions on the right to freedom of trade and profession guaranteed under Article 19(1)(g) of the Constitution. They argued that the fixation of a cut-off date for filing returns lacks rationale and is therefore violative of Article 19(1)(g) and Article 302 of the Constitution, and in teeth of Article 13. They also feebly argued that the provision should be read down as directory and not mandatory. Revenue's arguments: The revenue authorities, represented by the Advocate General for the State, relied on Supreme Court decisions in ALD Automotive Private Limited and Jayam and Company to argue that ITC is a concession and its availment is subject to strict compliance with statutory conditions. They asserted that fiscal legislation with uniform application cannot be violative of Article 19(1)(g) and that the question of violation of other articles does not arise.