SECTION 16(2)(C) – LEX NON COGIT AD IMPOSSIBILIA

Author : By Mr. Ashish Miglani

INTRODUCTION

SECTION 16(2)(C) is one of major and dangerous defining section to avail Input Tax Credit (ITC) or should I say one of most draconian (Harsh) section to avail ITC.

WHAT IS INPUT

Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

WHAT IS INPUT TAX

Input tax  in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes—

 (a) The integrated goods and services tax charged on import of goods;

(b) The tax payable under the provisions of sub-sections (3) and (4) of section 9;

(c) The tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act;

(d) The tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or

(e) The tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act,

But does not include the tax paid under the composition levy.

RULE 36 (3)

(1)……….

(2)……….

(3) No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.

A Supplier Registered under GST is required to upload his invoices on the common portal by 11^th of the succeeding month in case of monthly filer and 13^th in case of QRMP Scheme in GSTR – 1 under Section 37 and after it, the invoice will reflect in recipient GSTR 2A/2B through which he can claim ITC but the main part of the law is left behind which is Section 16(2) (C) which states that

Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless

(a)…..

(b)……

(c) Subject to the provisions of Section 41 or Section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply.

Section 41 States

Claim of input tax credit and provisional acceptance thereof—

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.

(2) The credit referred to in sub-section (1) shall be utilized only for payment of self- assessed output tax as per the return referred to in the said sub-section.

SECTION 43A

Procedure of furnishing return and availing input tax credit (Not Notified Yet)

JUDGMENTS IN FAVOUR OF TAXPAYERS

Hughey v/s JMS Development Corporation 78 F 3d 15 23

Justice Owens of the United States Court of Appeals used these words – Lex Non Cogit Ad Impossibilia which means “A body of law does not compel or forces someone to do the thing which is impossible. The law does not compel the doing of impossibilities”.

‘Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will in general excuse him”.

M/S Shree Gobind Alloys Pvt Ltd V/S Union of India and Others – Orissa High Court

Here court stated that ITC can only be denied where purchases are proved to be collusive and in nature

denying ITC to a buyer of goods or services for default of the supplier of goods or services would tantamount to shifting the incidence of tax from the supplier to the buyer, over whom it has no control whatsoever, is arbitrary and irrational & therefore violative.

M/S D.Y Beathel V/S State Tax Officer – Madras High Court

One of the major decision which was taken by the Hon’ble High Court which states that No GST can be demanded from the buyer for the fault of Seller of non – payment of taxes to the Government.

Hon’ble High Court quashed the impugned order due to non – examination of Sellers in the enquiry and non – initiation of recovery action against sellers in the first place.

AUTHOR VIEW

Section 16(2)(c) is one of the most dangerous section in terms of claiming ITC as there is no mechanism to check that Supplier has paid the taxes as it only displays that the supplier has filed the return that’s why the law cannot compel to do the impossible which beyond our control. Therefore it is ultra virus in nature.

DISCLAIMER

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The views expressed in this article are those of individual author’s writing in his individual capability only. The information provided in this article does not intend to constitute legal advice, instead all the information, content, and all the materials available in this article are for general purpose only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter.

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