M/S Drolia Dawaghar Through Its Proprietor Namely Mr Sanjay Drolia vs. Union Of INDIA Through The Secretary Ministry Of Finance Deptt Of Revenue

Held

The Court disposed of the writ petition in view of Clause (5) of Section 16, which was inserted by the Finance (No.2) Act, 2024, with effect from 01.07.2017. The Court directed the respondents to allow the petitioner to take Input Tax Credit (ITC) in respect of delayed returns filed for the Financial Year 2018-19. Furthermore, the Court ordered that any interest and penalty levied on the petitioner by the respondents for this period shall be refunded with 6% per annum interest from the date of payment until the date of refund. The Court did not expressly decide on the ultra vires challenge to Section 16(4) and Rule 61(5) but granted relief based on the subsequent legislative amendment.

Facts

The petitioner, M/s. Drolia Dawaghar, filed a writ petition challenging Section 16(4) of the Central Goods and Services Tax Act, 2017, and an amendment to Rule 61(5) of the Central Goods and Services Rules, 2017. The petitioner argued that these provisions, which restrict Input Tax Credit (ITC) availability based on timeframes for filing returns, violate constitutional rights and the basic structure of the GST Act. The petition also sought to quash an order dated 06.07.2023 and a summary order in DRC-07, both issued by the Superintendent, Central GST & C. Ex., Range Deoghar, which were received by the petitioner on 27.07.2023. The dispute pertains to the availment of ITC for delayed returns filed for the Financial Year 2018-19.

Key Issues

1. Whether Section 16(4) of the Central Goods and Services Tax Act, 2017, which imposes a time limit for availing Input Tax Credit (ITC), is ultra vires the Constitution of India, specifically Articles 14, 19(1)(g), and 300A, and the basic structure of the GST Act? The petitioner argued that this section arbitrarily restricts the right to carry on business and property rights by limiting ITC availability. 2. Whether the amendment to Rule 61(5) of the Central Goods and Services Rules, 2017, which declared GSTR-3B as a return under Section 39 retrospectively from 01.07.2017, is ultra vires the Constitution, particularly Articles 14, 19(1)(g), and 300A, as it interferes with vested rights to ITC? The petitioner contended that this retrospective amendment unfairly impacts their ability to claim ITC. The respondents did not record any specific arguments in the judgment.