M. Janardhan vs. The State Of Telangana

Facts

The petitioner, M/s. P V Prasad Associates, has filed writ petitions challenging orders-in-original dated 21.07.2023 and orders-in-appeal dated 23.01.2026. The petitioner also challenges the vires of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017. The core of the challenge is that the respondents are penalizing the petitioner, a bona fide purchaser who has paid taxes on received goods, without first proceeding against the suppliers. The State Tax counsel acknowledged that a similar issue is pending before the High Court in W.P.No.6880 of 2025 and batch. The court granted the State three weeks to file a counter affidavit and allowed the petitioner to implead the suppliers as respondents. Coercive steps against the petitioner were stayed until the next hearing.

Held

The Court acknowledged that a similar issue is pending before it in W.P.No.6880 of 2025 and batch. Consequently, the Court ordered that no coercive steps be taken against the petitioner pursuant to the impugned orders until the next date of hearing, maintaining parity with the other cases. The Court also granted the petitioner liberty to implead the suppliers as respondents in the writ petitions and directed that these matters be tagged along with W.P.No.6880 of 2025 and batch. The Court did not decide on the vires of Section 16(2)(c) of the CGST Act, 2017, or the merits of the challenge to the impugned orders, as the proceedings are at an interlocutory stage pending the filing of a counter affidavit by the revenue. The ratio decidendi at this stage is that in matters involving similar legal questions pending before the High Court, interim protection should be granted to the petitioner to prevent coercive action, and related matters should be consolidated for efficient adjudication.

Key Issues

1. Whether Section 16(2)(c) of the Central Goods and Services Tax Act, 2017, is ultra vires the Constitution, particularly concerning the imposition of penalties on a bona fide purchaser who has paid taxes, without first proceeding against the supplier. Petitioner's Arguments: The petitioner contends that the respondents are penalizing them, a bona fide purchaser who has paid taxes on invoices and received goods, without first taking action against the suppliers. This action, they argue, is contrary to the principles of natural justice and the intent of the GST legislation, and therefore, Section 16(2)(c) of the CGST Act, 2017, is liable to be challenged on grounds of vires. They rely on the principle that the primary recourse should be against the defaulting supplier. Revenue's Arguments: The revenue's counsel did not dispute the existence of similar issues pending before the court and sought time to file a counter affidavit. No specific arguments were recorded for the revenue regarding the interpretation or application of Section 16(2)(c) or the challenge to its vires.