M/s. M. Trade Links vs. Union Of India [2024 (6) TMI 288]

    The Constitutional validity of GST provisions Section 16(2)(c) and Section 16(4) was challenged by the petitioner before the Hon’ble High Court of Kerala in the present case.

    The High Court observed that Input Tax Credit (ITC) is in the nature of a benefit or concession extended to the dealer under the statutory scheme. It is no absolute right, even if it is held to be an entitlement it is subject to the restrictions u/s 16(2) & 16(4). Keeping in mind the conditions to determine constitutionality of taxing provisions, it was held by the Hon’ble Kerala High Court that Section 16(2) & 16(4) of the CGST act are not unconstitutional. The interpretation of the provisions was elucidated with the help of various cases wherein it was held that Section 16(1) is an enabling provision to claim benefit under ITC, but such benefit is not an absolute right and is subject to fulfilment of conditions provided under Section 16(2) & 16(4). Section 16(2) provides a non-obstante clause preventing unregistered persons from claiming benefit of the scheme subject to conditions, it was held that this is a restrictive and not an enabling provision, as such a non-obstante clause preceding a restrictive provision doesn’t exclude application of other restrictive provisions on the matter as they are confirmatory and non-contradictory. As such the temporal limitation under Section 16(4) is applicable to Section 16(2) despite the non-obstante clause due to it being non-contradictory. Hon’ble High Court held that the conditions are necessary to impose on the scheme in the interest of revenue and budgetary management.

    W&B Comments: Many taxpayers were issued notices demanding reversal of ITC claimed beyond the time limit prescribed under Section 16(4) of the CGST Act and various petitions were filed across the various High Courts[1] on the issue. The validity of Section 16(4) is pending before the Hon’ble Supreme Court and in the case of Shanti Motors vs. Union of India[2] the Court has issued notice to the Revenue. In regards to this, the 53rd GST Council Meeting also has recommended to extend the time limit for availing ITC pertaining to FY 2017-18 to FY 2020-21 to November 30, 2021 retrospectively w.e.f. July 1, 2017. Therefore the present judgment and GST council recommendation in regards to a retrospective amendment to allow ITC is a welcome step.


    [1] Jain Brothers [2023 (12) TMI 829]; BBA Infrastructure [2023 (12) TMI 835]; Gobinda Construction [2023 (9) TMI 902]

    [2] (2024) 19 Centax 214 (S.C.)

    Dated: July 1, 2024

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