Kerala High Court reaffirms the constitutionality of GST Section 16(2)(c) and CGST Rule 36(4)
In a recent development, the High Court of Kerala at Ernakulam, in Case No. WA Nos.1853 & 1857/2023, has upheld the constitutional validity of specific provisions under the Central Goods and Services Tax (CGST) Act and Rules. Two businessmen, Nahasshukoor of M/s N. S. Metals and Ansil Ibrahim of M/s Light House, both located in Alappuzha, Kerala, had challenged the denial of Input Tax Credits (ITC) under the CGST Act and State Goods & Service Tax (SGST) Act. Their appeals were dismissed by the Assessing Authority, leading to penalties and recovery proceedings.
Central Issue:
The central issue revolved around the entitlement of purchasing dealers to claim input tax credits under section 16 of the CGST Act. The appellants contested the constitutionality of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules, alleging discrimination and a violation of Article 14 of the Constitution.
Court’s Decision:
On November 3, 2023, the High Court, comprising Dr. Justice A.K. Jayasankaran Nambiar and Dr. Justice Kauser Edappagath, delivered a common judgment. The court emphasized that ITC is a concession provided under the statute, not an absolute right. It pointed out that the burden of proof lies with the dealer to establish eligibility for such benefits. In this case, the appellants failed to produce necessary tax invoices despite multiple opportunities and did not exhaust alternative appellate remedies before approaching the court.
Constitutional Challenges Dismissed:
The court dismissed the constitutional challenges, asserting that the provisions were not discriminatory and did not violate Article 14. It emphasized the importance of judicial restraint in intervening with tax legislation unless manifest injustice or unconstitutionality is demonstrated.
Outcome:
As a result, the High Court bench dismissed both appeals without prejudice to the appellants’ right to challenge the assessment orders under the law.
Conclusion:
This decision by the Kerala High Court reaffirms the constitutionality of GST Section 16(2)(c) and CGST Rule 36(4). The ruling underscores the significance of adhering to statutory requirements for claiming ITC and highlights the need for exhausting alternative remedies before approaching the court. Business owners should ensure compliance with tax regulations to avoid penalties and legal complications.
To Access the GST Advisory 621 on Introduction Table 14 & 15 in GSTR-1 CLICK HERE
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