M/S Body Vigyan vs Assistant Commissioner Of on 3 September, 2024

Judgment Summary: M/S Body Vigyan vs Assistant Commissioner

Date of Judgment: September 3, 2024
Court: High Court of Karnataka at Bengaluru
Bench: Hon’ble Mr. Justice S.R. Krishna Kumar

1. Outcome

The writ petition was disposed of in favour of the Petitioner. The key outcomes are:
* The impugned order dated 16/03/2023 (Form GST-DRC-07) denying Input Tax Credit (ITC) for FY 2017-18 was quashed.
* The case was remanded back to the adjudicating authority (Respondent No. 1) to the stage of the show cause notice.
* The authorities were directed to re-adjudicate the matter by giving effect to the newly inserted Section 16(5) of the CGST/KGST Act, which extends the time limit for claiming ITC for FY 2017-18.
* The re-adjudication must be completed within one month after providing the petitioner a reasonable opportunity to be heard.
* All other legal contentions, including the constitutional challenge to Section 16(4), were kept open.

2. Core Issue

The central issue was the denial of Input Tax Credit (ITC) to the petitioner for the financial year 2017-18 on the grounds that it was time-barred under Section 16(4) of the CGST and KGST Acts. The petitioner also challenged the constitutional validity of this time limit.

The resolution of the case, however, pivoted on a new legislative amendment—the insertion of Section 16(5) via "The Finance (No.2) Act, 2024"—which provided a retrospective extension for claiming such ITC.

3. Key Facts

• The petitioner, M/S Body Vigyan, was denied ITC for invoices pertaining to FY 2017-18.
• The denial was based on the time limitation prescribed under Section 16(4) of the CGST/KGST Act.
• The Assistant Commissioner (Respondent No. 1) issued a demand order in Form GST-DRC-07 on March 16, 2023, confirming the denial of ITC.
• The petitioner filed a writ petition challenging the demand order and the constitutionality of Section 16(4).
• During the pendency of the petition, "The Finance (No.2) Act, 2024" was enacted, introducing Section 16(5) to the GST Acts. This new provision extended the deadline for registered persons to claim ITC for the financial years 2017-18 through 2020-21, up to November 30, 2021.

4. Arguments

• Petitioner's Arguments:

  • Initially, the petitioner challenged Section 16(4) as being arbitrary, merely procedural, and violative of Articles 14 and 300A of the Constitution of India.
  • Following the legislative amendment, the petitioner’s primary argument shifted. They contended that the newly inserted Section 16(5) provided a direct statutory remedy by extending the time limit to claim ITC for FY 2017-18.
  • The petitioner requested the court to dispose of the petition by directing the tax authorities to apply the benefit of the new Section 16(5), without pressing the constitutional challenge at this stage.

• Respondents' Arguments (Revenue):

  • The counsel for the Revenue conceded that Section 16(5) had been introduced by "The Finance (No.2) Act, 2024".
  • They fairly submitted that the new provision was applicable to the petitioner and effectively extended the time for availing ITC until November 30, 2021.
  • They agreed that the petition could be disposed of with a direction to implement the amended law.

5. Court’s Reasoning

• The Court observed that the issue was "directly and squarely covered" by its own recent judgment in M/s. Sadhana Enviro Engineering Services vs. Joint Commissioner of Central Tax & others.
• The Court's decision was primarily based on the supervening legislative amendment. The insertion of Section 16(5) provided a clear statutory relief to the petitioner by creating a special dispensation for claiming ITC for earlier years, including FY 2017-18.
• Section 16(5) begins with a non-obstante clause ("Notwithstanding anything contained in sub-section(4)..."), giving it an overriding effect over the time limit prescribed in Section 16(4) for the specified financial years.
• Given this clear legislative remedy, the Court found it unnecessary to adjudicate on the constitutional validity of Section 16(4).
• Therefore, the most appropriate course of action was to quash the impugned order, which was passed without considering the new amendment, and remand the matter back to the authority for a fresh decision in light of the new law.

6. Statutory References

• Constitution of India:
  • Article 14 (Right to Equality)
  • Article 226 & 227 (Writ Jurisdiction of High Court)
  • Article 300A (Right to Property)
• Central Goods and Services Tax Act, 2017 (CGST Act) / Karnataka Goods and Services Tax Act, 2017 (KGST Act):
  • Section 16(1) & 16(2): Entitlement and conditions for taking ITC.
  • Section 16(4): The provision prescribing the time limit for availing ITC, which was under challenge.
  • Section 16(5): The newly inserted provision (via The Finance (No.2) Act, 2024) extending the time limit for FY 2017-18 to 2020-21 until November 30, 2021.
  • Section 39(1): Pertaining to the furnishing of returns.
  • Section 73(9): Pertaining to the issuance of an order for determination of tax.
• The Finance (No.2) Act, 2024:
  • Section 118: The clause that introduced Section 16(5) into the CGST Act.

7. Precedents Cited

• M/s. Sadhana Enviro Engineering Services vs. Joint Commissioner of Central Tax & others (W.P.No.6138/2020, dated 03.09.2024). The present judgment heavily relies on and extensively quotes this precedent, stating that the issue is squarely covered by it.