M/S Ekta Enterprises Trade Name (Prop. Shri Suresh Kumar Mansukhani)249/1/4 Ground Floor Dmart Road vs. Union Of INDIA

Held

The Court held that Section 16(4) of the CGST Act, which restricts the claim of ITC solely on the ground of filing a return after the prescribed date, is arbitrary. The Court reasoned that taxpayers who claim ITC have already paid the tax to the supplier, and thus cannot be deprived of their right to claim ITC. The Court further observed that Section 16(2) of the CGST Act, with its non-obstante clause, establishes a right to ITC upon fulfillment of its conditions and that Section 16(4) effectively renders Section 16(2) meaningless. The Court noted that Section 16(2) was drafted to show clear legislative intent that it is not subject to Section 16(4). The Court also found that imposing a time limit through Section 16(4) overrides the scheme of the statute. The Court further pointed out that the GST laws do not permit filing revised returns, and disallowing ITC for belatedly filed returns after accepting late fees and interest amounts to punishing the taxpayer twice. Considering that the Central Government has proposed an amendment to Section 16 to remove the time limit, the Court allowed the batch of petitions. The show cause notices and assessment orders were set aside, with liberty to the State to take appropriate action in light of the amendment in GST law. The Court did not examine the constitutional validity of Section 16(4).

Facts

This judgment addresses multiple writ petitions filed by various entities, including M/s Anand Steel, M/s Digiana Industries Private Limited, and others, against the Union of India and other respondents. The core issue revolves around the denial of Input Tax Credit (ITC) to the petitioners due to alleged delays in filing their Goods and Services Tax (GST) returns. The petitioners are challenging the show cause notices and assessment orders issued by the revenue authorities, which have resulted in the disallowance of their claimed ITC. The petitions were heard analogously due to the similarity of the controversy involved, with the facts of W.P. No. 2164/2024 being taken as representative.

Key Issues

1. Whether Section 16(4) of the CGST Act, which imposes a time limit for claiming Input Tax Credit (ITC) based on the due date of furnishing a return, is arbitrary and violates the taxpayer's right to claim ITC, especially when tax has already been paid to the supplier? (Question of law) 2. Whether Section 16(2) of the CGST Act, which outlines the conditions for eligibility for ITC, has an overriding effect over Section 16(4) of the CGST Act, given its non-obstante nature and clear legislative intent? Petitioner's arguments: The petitioners contended that Section 16(4) of the CGST Act is arbitrary because it deprives them of ITC even after they have paid the tax to the supplier. They argued that the GST laws do not provide for revised returns, forcing taxpayers to be cautious and potentially delay filing. They also submitted that paying late fees and interest under Sections 47 and 50, respectively, already compensates the treasury for delayed filing, making the disallowance of ITC a double penalty. Furthermore, they highlighted that the Central Government has proposed an amendment to Section 16 of the GST Act through the Act of 2024, which seeks to remove the time limit condition, indicating the problematic nature of the existing provision. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or State.