Sona Biscuits Limited vs. The Union Of INDIA

Held

The petitioner sought permission to withdraw the writ petition with liberty to file a fresh petition with complete particulars on the same and subsequent cause of action. The Court allowed this prayer. As and when such a petition is filed, it shall be listed on priority. Any interlocutory applications filed in the present petition also stand disposed of. The Court did not decide on the constitutionality of the impugned provisions or the interpretation of Section 16(2)(c) or Rule 36(4) as the petition was withdrawn.

Facts

The petitioners, Sona Biscuits Limited and its director Ashok Kumar Agarwal, filed a writ petition before the Patna High Court. They sought various reliefs, including a declaration that sub-rule 4 of Rule 36 of the CGST/BGST Rules and Section 16(2)(c) of the CGST/BGST Act are unconstitutional. They also sought to read down Section 16(2)(c) to allow Input Tax Credit (ITC) denial only in cases of collusion with suppliers to defraud revenue or sham transactions. Furthermore, they requested that ITC should not be denied due to cancellation of registration or non-existence of inward suppliers unless collusion is proven. The petition was filed against the Union of India and the State of Bihar.

Key Issues

1. Whether sub-rule 4 of Rule 36 of the CGST/BGST Rules is unconstitutional and against the scheme of the CGST/BGST Act? 2. Whether Section 16(2)(c) of the CGST/BGST Act is unconstitutional and against the scheme of the CGST/BGST Act? 3. If Section 16(2)(c) is upheld, can it be read down to permit denial of ITC only in cases of collusion with suppliers to defraud revenue or sham transactions? 4. Can ITC be denied for cancellation of registration or non-existence of inward suppliers without evidence of the petitioner's collusion to defraud revenue? Petitioner's Arguments: The petitioners argued that the impugned provisions are unconstitutional and against the scheme of the GST Act. They contended that ITC should not be denied without proof of their collusion with suppliers to defraud the revenue, especially in cases of supplier non-existence or registration cancellation. They sought to read down Section 16(2)(c) to limit denial of ITC to situations involving fraud or sham transactions. Revenue's Arguments: The judgment does not record any specific arguments made by the respondents (Union of India and State of Bihar).