2025 (6) TMI 583 - HC - GST

Constitutional validity of Section 16 (2) of the CGST/SGST Act 2017 - violative of Article 14 (19) (i) of the Constitution of India - reading down the phraseology has been actually paid occurring in Section 16 (2) of the CGST/SGST Act to ought to have been paid - HELD THAT - Though learned counsel for the petitioner submits that he is questioning the orders passed under the provisions of Section 73 (9) and he would fall within the category of Section 73 (10) whereby the time period prescribed is 3 years from the date of furnishing the annual returns for financial year to which the tax is not paid or short paid or input tax credit is wrongly availed. Therefore since within 3 years no proceedings are initiated against him the proceedings and orders passed by the 1st respondent is bad in law illegal and the same requires to be set aside. However on careful perusal of the provisions of Section 107 of the KGST Act which prescribes that on any decision or order passed and a person aggrieved by it under the Karnataka Goods and Services Tax Act by any adjudicating authority may appeal to such appellate authority as may be prescribed within 3 months on the date on which such decision or order is communicated to such person. There are no good reason to go into the merits of the matter - petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether Section 16(2) of the CGST/SGST Act, 2017 is unconstitutional and violates Article 14 and Article 19(i) of the Constitution of India.
• Whether the phrase "has been actually paid" appearing in Section 16(2) should be read down to "ought to have been paid."
• Whether the impugned order dated 19.12.2023 passed by the Assistant Commissioner of Commercial Taxes (Audit-1) is illegal, violative of principles of natural justice, and barred by limitation.
• Whether the writ petition is maintainable in the face of an alternative efficacious remedy available under Section 107 of the Karnataka Goods and Services Tax Act, 2017.
• Whether the petitioner falls within the time bar provisions of Section 73(10) of the KGST Act, which prescribes a 3-year limitation period for initiating proceedings for tax not paid or input tax credit wrongly availed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Constitutionality of Section 16(2) of the CGST/SGST Act, 2017 and the interpretation of "has been actually paid"

Relevant legal framework and precedents: Section 16(2) of the CGST/SGST Act governs the conditions under which input tax credit can be availed, specifically requiring that the tax "has been actually paid" to the government. The petitioner challenges this provision as violative of Articles 14 (equality before law) and 19(i) (freedom of trade) of the Constitution.

Court's interpretation and reasoning: The Court noted the petitioner's argument to read down the phrase "has been actually paid" to "ought to have been paid" to avoid constitutional infirmity. However, the Court did not delve into the merits of this constitutional challenge, as the petitioner did not press these prayers during the hearing.

Key evidence and findings: The petitioner's submissions on unconstitutionality were not pursued actively, and no detailed evidence or precedent was considered on this issue.

Application of law to facts: Since the petitioner did not press these claims, the Court refrained from adjudicating on the constitutional validity of Section 16(2).

Treatment of competing arguments: The respondents did not specifically address the constitutional challenge in detail, focusing instead on procedural and maintainability issues.

Conclusion: No determination was made on the constitutionality or interpretation of Section 16(2).

Issue 2: Legality and validity of the impugned order dated 19.12.2023

Relevant legal framework and precedents: The petitioner contended that the order passed by the Assistant Commissioner was illegal, violated natural justice, and was barred by limitation. The relevant provisions include Section 73(9) and Section 73(10) of the KGST Act, which deal with assessment and limitation periods respectively.

Court's interpretation and reasoning: The petitioner argued that since no proceedings were initiated within the 3-year limitation period under Section 73(10), the order was invalid. However, the Court observed that the petitioner did not challenge the order via the prescribed appellate remedy under Section 107 of the KGST Act.

Key evidence and findings: The Court referred to a coordinate Bench's decision in a similar writ petition (No. 102932/2024), which dismissed the petition on maintainability grounds while reserving liberty to pursue the statutory appeal.

Application of law to facts: The Court found that the petitioner had an alternative efficacious remedy by way of appeal under Section 107 and had not availed it. The limitation issue raised was to be examined in the appellate proceedings rather than in writ jurisdiction.

Treatment of competing arguments: The petitioner's contention on limitation and natural justice was not addressed substantively because the Court prioritized the procedural bar of alternative remedy.

Conclusion: The Court declined to interfere with the impugned order in the writ petition, directing the petitioner to approach the appellate authority.

Issue 3: Maintainability of the writ petition in view of alternative remedy under Section 107 of the KGST Act

Relevant legal framework and precedents: Section 107 of the KGST Act allows an appeal against any order passed by an adjudicating authority within 3 months from communication of the order. The Court relied on the precedent where a similar writ petition was dismissed on this ground.

Court's interpretation and reasoning: The Court emphasized that the availability of an alternative efficacious statutory remedy bars the maintainability of a writ petition challenging an order under the KGST Act.

Key evidence and findings: The coordinate Bench's ruling in Writ Petition No. 102932/2024 was cited as binding precedent.

Application of law to facts: Since the petitioner had not availed the appeal remedy within the prescribed time, the Court held that the writ petition was not maintainable.

Treatment of competing arguments: The petitioner's reliance on limitation and natural justice was insufficient to bypass the statutory appeal remedy.

Conclusion: The writ petition was dismissed on maintainability grounds with liberty to approach the appellate authority.

3. SIGNIFICANT HOLDINGS

The Court held:

"On a bare perusal and reading of Section 107 of Clause I, there is no ambiguity that on any order passed by the adjudicating authority an appeal remedy is provided before the appellate authority."

This establishes the principle that statutory appeal remedies under the KGST Act must be exhausted before seeking writ jurisdiction.

Further, the Court ruled:

"Since the matter is already covered by a Coordinate Bench of this Court, I do not find any good reason to go into the merits of the matter."