Time Limit prescribed for claiming ITC U/s 16(4) APGST Act is not unconstitutional: Andhra Pradesh HC [Read Order]

Top Stories Time Limit prescribed for claiming ITC U/s 16(4) APGST Act is not unconstitutional: Andhra Pradesh HC [Read Order] By Aiswarya Krishnadas – On January 28, 2024 8:29 am – 3 mins read The Andhra Pradesh High Court has ruled that the time limit prescribed for claiming Input Tax Credit (ITC) under Section 16(4) of the Andhra Pradesh Goods and Service Tax (APGST) Act, 2017 was not unconstitutional.

The issue to be decided was whether by virtue of imposition of time limit for claiming Input Tax Credit (ITC), Section 16(4) of the Central Goods and Service Tax (CGST) Act 2017, violates Article 14, 19(1) (g) and 300A of the Constitution of India The counsel for the petitioner Rama Krishna Kumar Potturi argued that petitioner was that, being new to business and starting during the COVID-19 pandemic, the petitioner faced challenges filing returns for March 2020. Eventually, on 27.11.2020, the petitioner submitted the optional GSTR3B for March 2020, paying a late fee of Rs.10,000, which the 1st respondent accepted. The counsel contended that, with the acceptance of the return and late fee, the 1st respondent implicitly exonerated any delay for claiming ITC beyond the period in Section 16(4) of the APGST/CGST Act, 2017. Despite this, the 1st respondent, surprisingly and without issuing a proper show cause notice or considering the reply dated 17.01.2022, sent a summary order on 15.03.2022.

Unjustly, this order disallowed the ITC of Rs.4,78,626 and demanded Rs.11,24,994 for tax, interest, and penalty under Section 74 of the APGST/CGST Act, 2017. Counsel for the petitioner strongly argued that restricting the Input Tax Credit (ITC) by imposing time limits under Section 16(4) of the APGST/CGST Act, 2017 violates constitutional rights (Article 14, 19(1)(g), and 300A). He asserted that Section 16(2), with a “non-obstante” clause, overrides Section 16(4)of the APGST/CGST Act, allowing ITC if conditions in Section 16(2) of the APGST/CGST Act, are met. Despite the claim being beyond the period specified, the petitioner, permitted by the 1st respondent to file a return with a late fee of Rs.10,000/-, should not be denied ITC as it contradicts Section 16(4)of the APGST/CGST Act 2017 Counsel for the Respondent argued that it was false to allege that the notice dt: 16.12.2021 was sent by the department through a private email ID.

The said email ID is the official e-mail ID allotted to the 1st respondent. Furthermore, the notice was sent in Form GST DRC-01 as per Rule 142 of GST Rules, 2017, and various contentions raised by the petitioner in their reply were considered in a just and proper manner without bias, and they were rejected on cogent grounds. Before passing the order, in terms of Section 75(4) and (5) of the GST Act, 2017, a brief show cause notice was issued, and an opportunity for a personal hearing was given to the petitioner, thereby following the principles of natural justice. Since the reply filed by the petitioner was not in accordance with the provisions of the GST Act and Rules, 2017, it was rightly rejected. Therefore, it is false to contend that the reply was not considered before passing the impugned order. No provisions of Articles 14, 16, and 19(1)(g) of the Constitution of India were infringed in the instant case.

In fact, those Articles have no relevance to the case on hand. The division bench of the court comprising Justice Durga Prasad Rao and Justice T. Mallikarjuna Rao observed that without serving a proper show cause notice in Form GST DRC-01 and without granting sufficient opportunity to the petitioner U/s 74(5) of the CGST Act, and not considering the petitioner’s submissions and COVID-19 limitations r/w Amnesty Notifications, but confirming the demand of tax, interest, and penalty by restricting the credit with erroneous facts, despite collecting a late fee of Rs.10,000/- for the delay in filing the returns, was not only violated of principles of natural justice but also arbitrary, improper, illegal, and in violation of Article 14, 19(1)(g), 20, 21, and 300-A of the Constitution of India. Consequently, the summary order/proceedings of the 1st respondent have been set aside as null and void, and such other orders deemed fit in the circumstances of the case have been passed.

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