JAIN BROTHERS Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner herein, which is a proprietorship firm registered under the provisions of the Central Goods and Services Tax Act, 2017 (for short, 'the CGST Act'), seeks to challenge the constitutional validity of Sec. 16(4) of the CGST Act as violative of Articles 14, 19(1)(g) and 300A of the Constitution of India and further seeks a declaration that Sec. 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Ss. 16(1) and 16(2) of the CGST Act, and eventually seeks to challenge the show cause notice dtd. 20/5/2022 (Annexure P-8) in light of Sec. 100 of the Finance Act, 2022 and to allow the ITC (Input Tax Credit) claimed in the month of March, 2019 and also to quash the proceedings initiated under Sec. 16(4) of the CGST Act by respondents No.3 to 5 herein.

(2.) The constitutional validity of Sec. 16(4) of the CGST Act has been challenged on the following factual backdrop: - Relevant Facts

(3.) The petitioner is a proprietorship firm engaged in the trading of Oils and allied products thereof, registered under the provisions of the CGST Act as well as the Chhattisgarh Goods and Services Tax Act, 2017 having GSTIN: 22ACJPJ0020A1ZR and certificate of GST registration has been filed as Annexure P-1. It is further case of the petitioner that the petitioner being a trader, regularly purchases goods and avails certain services thereof in relation to the business. The petitioner being a registered firm under the specified GST Acts is required to furnish its monthly return under Sec. 39 of the CGST Act read with Rule 61 of the Central Goods and Services Tax Rules, 2017 (for short, 'the CGST Rules') in Form GSTR-3B. The petitioner for the financial year 2018-19 filed return under Sec. 39 of the CGST Act in Form GSTR-3B for the month of March, 2019 on 13/11/2019. Return was specifically filed for the specified period and late fees was also paid in accordance with Sec. 47 of the CGST Act for the period March, 2019 in Form GSTR-3B of April, 2019 and interest under Sec. 50 was also paid in the return for the period March, 2019. The ITC claimed in the return for the month of March, 2019 was eligible ITC for the specified period in terms of Sec. 16(2). Returns filed under Sec. 39 in Form GSTR-3B for the months of March, 2019 and April, 2019 have been annexed as Annexures P-2 and P-3. Thereafter, the petitioner was served with a demand letter dtd. 6/2/2020 (Annexure P-4) by respondent No.3 demanding an amount of Rs.9,43,919.00 to be paid alleging that Input Tax Credit (ITC), as specified above, is availed in contravention of Sec. 16(4) of the CGST Act along with interest under Sec. 50 of the said Act, which the petitioner replied vide Annexure P-5 and prayed for quashment of the proceedings and not to issue any further notice, but respondent No.3 again issued a demand letter dtd. 28/1/2021 (Annexure P-6) rejecting the grounds raised by the petitioner stating that Sec. 16(4) provides for condition of availing ITC and accordingly demanded the payment of wrongly availed ITC along with appropriate interest, which the petitioner again replied by Annexure P-7 that he satisfies all the requirements of Sec. 16(2) of the CGST Act, but not satisfied with that, the petitioner was served with a show cause notice on 26/5/2022 vide Annexure P-8 alleging that the petitioner has wrongly availed ITC for the month of March, 2019 by contravening with the provisions of Sec. 16(4) read with Sec. 39 of the CGST Act and Rule 61 of the CGST Rules. The petitioner was required to show cause as to why total goods and services tax amounting to Rs.9,43,920.00 should not be demanded and recovered from him under Sec. 73(1) of the CGST Act, interest at applicable rate should not be demanded and recovered under Sec. 50 of the said Act and penalties should not be imposed under Sec. 73(9) of the said Act leading to filing of the instant writ petition questioning the constitutional validity of Sec. 16(4) of the CGST Act and eventually questioning the proceedings initiated for recovery of Rs.9,43,920.00 along with interest and penalties stating that the said recovery under Sec. 16(4) is violative of Articles 14, 19(1)(g) and 300A of the Constitution of India and that Sec. 16(4) is merely procedural in nature which cannot override substantive conditions as mandated under Sec. 16(1) and 16(2) and further called in question the recovery proceedings initiated in shape of show cause notice dtd. 20/5/2022.