| Particulars | Details |
| Name of Petitioner | M/s M. Trade Link |
| Name of Respondent | Union of India & Ors. |
| Authority | Kerala High Court |
| Date of Judgement | 04th June 2024 |
Facts of the Case:
The Petitioner has submitted a detailed challenge against the denial of Input Tax Credit (ITC). Their main arguments can be categorized into three points:
- The denial of ITC is unjust despite having valid tax invoices, proof of payment, and receipt of goods.
- In some instances, suppliers have not remitted the tax, which is not reflected in their returns due to technical reasons or defaults.
- The Petitioners argue that the non-availability of tax payment in GSTR-2A should not impact their ITC entitlement if they possess valid documentation, as per Rule 36.
Submissions by the Petitioner:-
The document addresses the following key points regarding Input Tax Credit (ITC) and GSTR-2A:
- GSTR-2A is an auto-populated, read-only document based on suppliers’ GSTR-1. It is meant for facilitation and should not affect ITC entitlement.
- A CBIC press release from October 18, 2018, clarifies that GSTR-2A is intended for facilitation and does not impact the eligibility for ITC.
- The burden of proving ITC eligibility lies on the claimant. Valid invoices, payment proofs, and receipt of goods are sufficient to meet this burden.
- The law should not require actions that are impossible, such as ensuring suppliers remit the tax.
- Collecting and recovering taxes is the state’s responsibility, not that of the recipient dealers.
- Section 16(4) is criticized as arbitrary. Procedural provisions, like deadlines and delayed GSTR-3B filings, should not override substantive rights, such as the entitlement to ITC.
The petitioners request either declaring Section 16(2)(c) unconstitutional or interpreting it in a way that prevents the denial of Input Tax Credit (ITC) due to procedural errors or suppliers’ defaults. They advocate for a balanced approach that does not penalize bona fide recipients for issues outside their control, stressing the need to protect their constitutional rights and uphold the integrity and goals of the GST system.
Submissions by the department:-
The respondents argue that a taxing statute can only be deemed unconstitutional if it is manifestly arbitrary, unreasonable, beyond legislative competence, or violates constitutional rights. They contend that Sections 16(2)(c) and 16(4) of the GST provisions are designed to ensure tax compliance and integrity, which are neither arbitrary nor unreasonable, thereby maintaining the balance and proper functioning of the GST system.
Sections 16(2)(c) and 16(4) establish necessary conditions and time limits for claiming Input Tax Credit (ITC). These provisions ensure that ITC is claimed only when the tax is actually paid to the government, preventing fraudulent claims and maintaining the integrity of the tax chain. The time limit for claiming ITC, as stipulated in Section 16(4), promotes timely tax compliance and helps the government in making accurate budgetary estimations.
Findings & Decision of the court:-
A. Retrospective effect of Procedural Amendments:
The Court ruled that the amendment in the Finance Act 2022, which extends the due date for filing returns under Section 39 from September 30th to November 30th, is procedural and aims to address initial compliance difficulties.
Consequently, for the period from July 1, 2017, to November 30, 2022, if a dealer filed the return after September 30th but before November 30th, their Input Tax Credit (ITC) claim should be processed if otherwise entitled. The procedural amendment is given retrospective effect from July 1, 2017.
Additionally, petitioners who missed availing the benefits within the prescribed time limit can approach the GST authority within thirty days from the date of the judgment to avail themselves of these benefits.
Tax authorities must consider ITC claims based on the amended deadlines and provide retrospective effect to procedural changes.
B. Constitutional Validity of Sections 16(2)(c) and 16(4):
A taxing statute can be declared unconstitutional if it infringes upon the fundamental rights guaranteed under Part III of the Constitution of India, including Article 14.
“Article 14 of the Constitution of India guarantees the right to equality before the law and equal protection of the laws within the territory of India. This provision ensures that every individual is treated equally and without discrimination.”
The nature of the claim to Input Tax Credit under the GST Act is that ITC is a benefit or concession provided to dealers within the statutory scheme. Although, it may be considered an entitlement, it is subject to conditions and restrictions outlined in the law. The Court upheld the view that ITC is not an absolute right but a concession subject to statutory provisions.
The specific sections mentioned (Section 16(2)(c) and Section 16(4) of the CGST/SGST Act) were scrutinized for their constitutionality. It was determined that these provisions, which impose conditions and time limits on claiming ITC, are crucial for balancing tax collection and revenue allocation. The courts have upheld their validity, emphasizing the importance of adhering to statutory conditions for granting ITC.
The High Court of Kerala emphasized the need for a fair and balanced GST system in its recent judgment, addressing concerns raised by the petitioners. The court highlighted the importance of not unduly burdening genuine taxpayers due to the defaults of others, underscoring the necessity of protecting taxpayers’ constitutional rights while upholding the integrity of the GST framework.
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