M/S Viren Enterprises Through Its Proprietor Lata Sharma vs. Union Of INDIA Through The Secretary Ministry Of Finance Department Of Revenue

Held

The Court, in light of Clause (5) of Section 16 inserted by the Finance (No.2) Act, 2024, with effect from 01.07.2017, directed the respondents to allow the petitioner to take Input Tax Credit (ITC) in respect of delayed returns filed for the Financial Year 2019-20. The Court reasoned that the newly inserted provision provided a basis for allowing the delayed ITC. Consequently, any interest and penalty levied on the petitioner by the respondents for this period were to be refunded. The refund was to include interest at 6% per annum from the date of collection of such amounts until the date of repayment. The Court did not explicitly rule on the ultra vires challenge to Section 16(4) and Rule 61(5) but granted relief based on the subsequent legislative amendment. The specific order dated 20.04.2022 and DRC-07 dated 17.06.2022 were implicitly set aside by the direction to allow ITC and refund penalties.

Facts

M/s. Viren Enterprises, a proprietorship concern, filed a writ petition before the Jharkhand High Court. The petitioner challenged Section 16(4) of the Central Goods and Services Tax Act, 2017, and Rule 61(5) of the Central Goods and Services Rules, 2017, as amended. The petitioner also sought to quash an order dated 20.04.2022 and a DRC-07 dated 17.06.2022. The core of the dispute revolves around the restriction on availing Input Tax Credit (ITC) due to time limitations imposed by the aforementioned provisions and amendments. The petitioner argued that these provisions violated constitutional rights and the basic structure of the GST Act. The respondents, including the Union of India and the Deputy Commissioner of State Tax, were represented. The Court considered the arguments presented by both sides.

Key Issues

1. Whether Section 16(4) of the Central Goods and Services Tax Act, 2017, which restricts the availment of Input Tax Credit (ITC) within a specified time frame, 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 provision unfairly restricts the right to carry on business and the right to property by imposing an arbitrary time limit for ITC availment. 2. Whether the amendment to Rule 61(5) of the Central Goods and Services Rules, 2017, vide Notification No. 49/2019 dated 9th October, 2019, which declared GSTR-3B as a return under Section 39 of the CGST Act with retrospective effect from 01.07.2017, is ultra vires the Constitution, particularly Articles 14, 19(1)(g), and 300A? The petitioner contended that this retrospective amendment interferes with their vested right to avail ITC, thereby violating constitutional guarantees. The respondents' arguments were not explicitly detailed in the provided text, but their participation indicates a defense of the impugned provisions and actions.