LEGALITY OF SECTION 16(2)(c) of CGST Act, 2017–

CHALLENGED

INTRODUCTION
A key distinction between GST and the pre-GST tax regime is that GST
promises to eliminate the “cascading effect of taxes” or “tax on tax” that
sellers often suffer from. Input tax credit (ITC) under GST is one such core
concept that furthers this objective. ITC is the tax that a business pays on a
purchase, and when it makes the sale, it can reduce its tax liability. ITC helps
businesses reduce their tax liability on purchases by claiming credit to the
extent of GST. ITC is the cornerstone of GST and can be claimed regardless
of the location of the seller, making sales and purchases of products more
accessible.
However, section 16 of the Central Goods and Services Tax Act, 2017
(“CGST Act”) lists certain requirements that have to be fulfilled by a business
to claim ITC.
One such condition provided in section 16(2)(c) of the CGST Act is that the
tax charged in respect of the supply of goods must be actually paid to the
government by the supplier. Thus, a claimant would be entitled to ITC only
when, inter alia, the tax on supply has been paid to the government. Placing
such a burden on the claimant is arbitrary and impractical as it is impossible
for a claimant to determine whether or not the supplier has remitted the tax to
the government. In case of default, the claimant will not only be denied ITC
but also will face the additional burden of furnishing reverse ITC along with
interest to the government. Such a provision clearly discriminates between
bona fide claimants and fraudulent claimants of ITC.

The recent judgment of the Madras High Court in Pinstar Automotive India
Pvt. Ltd. v. Additional Commissioner (20 March 2023) is an example of the
issue. The High Court ruled that the condition laid down in section 16(2)(c) of
the CGST Act needs to be interpreted strictly and the mandate is upon the
claimant to ensure compliance with the provision, failing which it would not
be entitled to ITC. Thus, the Court ruled that it was not the department’s fault
that the suppliers in the present case failed to remit the tax to the department.
Instead, the onus is on the supplier or purchaser to ensure compliance with
section 16 without which they would not be entitled to ITC.
The said ruling is problematic and incorrect as it denies the benefit of ITC to
bonaide claimants.

DECIDED CASES
Arise India Ltd v/s Commissioner Of Trade & Taxes, 2017
The Hon’ble High Court of Delhi held Section 9(2)(g) of Delhi VAT Act to
the extent it disallows Input tax credit (ITC) to purchaser due to default of
selling dealer in depositing tax, as violative of Articles 14 and 19(1)(g) of the
Constitution of India.
This is violative of Article 14 of the Constitution in as much as it treats both
the innocent purchasers and the guilty purchasers alike. In other words, it is
submitted that by treating unequals equally the legislative measure is violative
of Article 14 of the Constitution There are other statutory avenues available to
the State to collect tax from the defaulting dealer.

LGW Industries Limited & ors. Vs. Union of India & ors
This is a case before the Calcutta High Court, wherein the petitioner has
challenged the constitutional validity of Section 16(2)(c) of the CGST
Act/WBGST Act, which seeks to deny ITC to a buyer of goods or services, if
the tax charged in respect of supply of goods or services has not been actually
paid to the Government by the supplier of goods or services
• the ground that denying ITC to a buyer of goods and services would
tantamount to treating both the ‘guilty purchasers’ and the ‘innocent
purchasers’ at par whereas they constitute two different classes
• shifting the incidence of tax from the supplier to the buyer, over whom it has
no control whatsoever, is arbitrary and irrational & therefore violative of
Article 14, Article 19(1)(g), and Article 300A of the Constitution of India
• It would also clearly frustrate the underlying objective of removal of the
cascading effect of tax as stated in the Statement of Object and reasons of the
Constitution (One Hundred And TwentySecond Amendment) Bill, 2014
• in the absence of any finding about petitioner's mala fide intention,
connivance, or wrongful association with the suppliers, no liability can be
imposed on it on the principle of vicarious liability on account of the
fraudulent conduct of the suppliers, who have obtained registration based on
fictitious documents.

Bharti Telemedia Ltd. Vs. Union Of India & Ors. (Delhi High Court)
The Petitioner i.e. Bharti Telemedia Ltd. is engaged in providing Direct-To-
Home satellite television broadcast services.
• Delhi HC issues notice in writ petition challenging Section 16(2)(d) and
proviso to Section 16(4) of Central Goods and Service Tax Act, 2017 (CGST
Act); Validity of Section 43A(6) of CGST Act, which hasn’t been notified
yet, is also being challenged;
• Petitioner’s contention is that the Department has been vested with all the
powers to recover any revenue lost owing to non-payment of taxes by erring
suppliers and credit cannot be denied to recipient for default on part of the
supplier; Legality of Section 16 challenged
• Further, As per the verdict of the Hon’ble Gujarat High Court in the case of
AAP & Co. Chartered Accountants v/s Union of India [ dated June 24,
2019], it was held that GSTR 3B was not a return in lieu of GSTR 3 specified
u/s 39 of CGST Act, 2017
• Notification No. 49/2019 – Central Tax dated 9th October, 2019 was issued
which amended Rule 61(5) of the CGST Rules providing that GSTR 3B shall
be a return u/s 39 of CGST Act, 2017 and such rule is amended
retrospectively with effect from 1st July, 2017.

S. S MARKETING (PRESENT APPEAL)

PARTNERSHIP FIRM

FACTS:
 The appellant is filing an appeal against an adjudication order issued by
the Assistant Commissioner of Commercial Taxes (Audit)-1.5, DGSTO-
1, Bangalore. The order, dated 04.08.2022, was issued under section
 73(9) of the CGST Act and KGST Act. The appellant received the order
by post on 18.08.2022 and is filing the appeal within the three-month
timeframe prescribed by section 107(1) of the CGST Act, 2017.

 The appellant has paid 10% of the disputed tax demand, totaling Rs.
28,860/-, as a pre-deposit. The main issue in the appeal is the denial of
input tax credit amounting to Rs. 2,88,503/-, which is not reflected in
the GSTR-2A. Additionally, interest of Rs. 2,31,318/- and a penalty of
Rs. 34,016/- have been levied.

 The appellant, a partnership firm providing marketing services, claims

to have filed returns regularly under GST laws. Despite this, there is a
discrepancy between input tax credits claimed based on tax invoices and
those reflected in GSTR-2A. The appellant has responded to pre-show
cause and show-cause notices, providing detailed submissions, which
are also part of the adjudication order.

 The Adjudicating Authority denied input tax credit based on section

16(2)(c) of the Acts due to discrepancies in GSTR-2A. The appellant is
aggrieved by this decision and seeks relief through the appeal,
requesting the appellate authority to allow the appeal and grant
appropriate relief in the interest of justice and equity. The appellant also
seeks permission to provide detailed submissions and produce necessary
evidence during the appeal hearing.

 The appellant claims that between July 1, 2017, and March 31, 2018,
they availed Input Tax Credit (ITC) amounting to Rs. 5,93,835.14 as per
their GSTR-3B filing and is detailed in Annexure-1

 The appellant further states that between July 1, 2017, and March 31,
2018, the total Input Tax Credit (ITC) reflected in the GSTR-2A is Rs.
3,46,248.74. They have provided detailed information in Annexure-2,

 the appellant points out that the difference between the Input Tax Credit
(ITC) as per GSTR-3B and GSTR-2A is actually only Rs. 2,47,586.40
(i.e., Rs. 5,93,835.14 minus Rs. 3,46,248.74). However, in the
adjudication order, this difference is incorrectly stated as Rs. 2,88,593/-.
 The appellant emphasizes that this discrepancy arises from factual errors
in the adjudication order, particularly concerning incorrect numbers
considered for some months. They respectfully request the correction of
this factual error by the Honorable Appellate Authority.

 After comparing Annexure-1 and Annexure-2, the appellant identified

invoices not reflected in GSTR-2A and listed them in Annexure-3.
These invoices mainly involve two parties, totaling Rs. 2,51,052.04,
similar to the difference stated earlier. A minor difference of Rs.
3,465.64 arises from amounts in GSTR-2A not properly availed in
GSTR-3B, which the appellant considers insignificant. This analysis
reconciles discrepancies between GSTR-3B and GSTR-2A, ensuring
accuracy in the appellant's submissions.

 Hence, after thorough analysis, the Input Tax Credit (ITC) not reflected
in GSTR-2A amounts to Rs. 2,51,052.04, contrary to the Rs. 2,88,593/-
stated in the adjudication order. This discrepancy primarily arises from
invoices not reflected by two parties, namely (i) Concentric Marketing
Consultants Pvt and (ii) Madhvenk.

 Regarding the first party, Concentric Marketing Consultants Pvt Ltd, it

is asserted that all transactions with this party are genuine, leaving no
room for doubt. The appellant possesses copies of all invoices issued by
Concentric Marketing Consultants Pvt Ltd, and payments for these
invoices were exclusively made via banking channels. To substantiate
this claim, the appellant is providing copies of the invoices along with
payment vouchers collectively as Annexure-4. Additionally, bank
statements showing these payments are enclosed as Annexure-5. Thus,
the authenticity of these transactions is undeniable.

 Furthermore, it is noted that the aforementioned party, Concentric

Marketing Consultants Pvt Ltd (GSTIN - 19AAGCC3344L2ZE), is
registered in West Bengal. However, during the initial months of GST
implementation up to December 2017, this party issued invoices
collecting CGST (Central Goods and Services Tax) and SGST (State
Goods and Services Tax) instead of IGST (Integrated Goods and
Services Tax). This discrepancy can be observed in the invoices issued
during December 2017, where CGST and SGST were collected but
were reflected in GSTR-2A under IGST. Subsequently, the party
 consistently reflected all invoices in GSTR-2A as per the appropriate tax
categories.

 The appellant contends that the apparent reason for the invoices not
being reflected in GSTR-2A during the initial months of GST
implementation seems to be teething issues rather than any deliberate
omission or irregularity. This is evidenced by the fact that subsequent
invoices from the same party, Concentric Marketing Consultants Pvt Ltd
(GSTIN - 19AAGCC3344L2ZE), have consistently appeared in GSTR-
2A. This consistency suggests that the transactions with this party are
indeed genuine. If there were any doubts about the genuineness of
transactions, subsequent invoices would likely have also been missing
from GSTR-2A.

 Regarding the second party, Madhvenk Enterprises (GSTIN -

27AIDPN4193Q1ZJ), the appellant asserts that all transactions with this
party are genuinely conducted. Moreover, Madhvenk Enterprises has
fulfilled its liability by paying the IGST (Integrated Goods and Services
Tax) owed by them. To support this claim, copies of the challans used
by Madhvenk Enterprises to remit the IGST are enclosed as Annexure-
6. This indicates that there is no loss to the exchequer, as the IGST
liability has been discharged appropriately.

 The amounts paid by Madhvenk Enterprises align exactly with the Input
Tax Credit (ITC) pertaining to the appellant, leaving no doubt about the
legitimacy of the payment towards the ITC claim. Given that the fact of
payment is established, the appellant is not currently providing copies of
invoices and payment proofs. However, the appellant seeks permission
from the Honorable Authority to produce these documents if directed to
do so.
 The appellant further states that they have been unable to establish
contact with the aforementioned parties as of now, and there is no
ongoing business being conducted with them. Consequently, the
appellant has not been able to obtain confirmation or a certificate as
outlined in Circular No. 183/2022.

 Additionally, it is emphasized that the reconciliation method provided in

the circular is just one of the available modes for taxpayers and not the
 sole method. This assertion is supported by various judicial precedents,
which will be elaborated upon in subsequent written arguments.

 It is further submitted that upon reviewing the status of tax return filing
and GST registration on the GST Common Portal during the relevant
period, it is evident that both the registrations of the aforementioned
parties were valid at that time. A screenshot depicting this information is
enclosed as Annexure-7.

SUMMARY:
The appellant is appealing an adjudication order issued by the Assistant
Commissioner of Commercial Taxes (Audit)-1.5, DGSTO-1, Bangalore,
dated 04.08.2022, under section 73(9) of the CGST Act and KGST Act. The
appellant received the order on 18.08.2022 and is filing the appeal within the
prescribed three-month timeframe under section 107(1) of the CGST Act,
2017. They have paid a 10% pre-deposit of the disputed tax demand totaling
Rs. 28,860/-. The main issue pertains to the denial of input tax credit of Rs.
2,88,503/-, along with interest of Rs. 2,31,318/- and a penalty of Rs. 34,016/-.
The appellant, a partnership firm offering marketing services, claims to have
regularly filed returns under GST laws. However, there is a discrepancy
between input tax credits claimed based on tax invoices and those reflected in
GSTR-2A. The Adjudicating Authority denied input tax credit based on
section 16(2)(c) of the Acts due to these discrepancies.
The appellant contends that they availed ITC amounting to Rs. 5,93,835.14 as
per GSTR-3B and Rs. 3,46,248.74 as per GSTR-2A between July 1, 2017,
and March 31, 2018. After comparing the two, they found a difference of Rs.
2,47,586.40, contrary to the adjudication order's figure of Rs. 2,88,593/-. The
appellant identified invoices not reflected in GSTR-2A, primarily involving
two parties, totaling Rs. 2,51,052.04. They assert that transactions with these
parties are genuine, supported by evidence of invoice copies, payments
through banking channels, and reconciliation discrepancies due to initial GST
implementation issues.
The appellant further states their inability to contact the parties and obtain
confirmation/certificates as per Circular No. 183/2022. They also emphasize
that the reconciliation method in the circular is not the only mode, citing
various judicial precedents. Additionally, they provide evidence of valid
registrations of the parties during the relevant period.
These arguments are presented to seek the appellate authority's relief,
requesting correction of factual errors and reconsideration of the denial of
input tax credit.

SECTIONS:
Section 107(1) of the CGST Act, 2017 pertains to the filing of appeals to the
Appellate Authority. It states that any person aggrieved by any decision or
order passed under the CGST Act by an adjudicating authority may appeal to
the appropriate appellate authority within three months from the date on
which the said decision or order is communicated to such person.

Section 16(2)(c) of the CGST Act, 2017: to claim the input tax credit for a
supply, it's necessary that the tax amount charged for that supply has been
paid to the government by the supplier, either through cash payment or by
utilizing input tax credit that they are eligible to claim.
GROUNDS OF APPEAL:

1. The appellant challenges the order of adjudication issued by the Assistant

Commissioner of Commercial Taxes (Audit-1.5), DGSTO-1, Bangalore,
arguing that it is opposed to law, the weight of evidence, natural justice,
probabilities, and the facts and circumstances of the case.

2. The appellant denies the entire demanded liability of tax, interest, and
penalty amounting to Rs. 5,53,927/- raised in the adjudication order.

3. Grounds related to the disallowance of input tax credit (ITC) claimed

include:
- Denial of GST payable based on alleged shortfall as per GSTR-2A.
- Lack of justification for disallowing input tax credit due to entries not
appearing in GSTR-2A.
- Invocation of disallowance under section 16(2)(c) of the Acts based on
presumption rather than evidence.
- Fulfillment of conditions under section 16(2) of the Acts by the appellant.
 - Suppliers' failure to upload entries in GSTR-2A should have been
addressed separately.
- Non-implementation of the reconciliation of GST input tax credits during
the relevant period.
- Lack of requirement for the appellant to prove the genuineness of input tax
credits.
- Constitutional challenge to the validity of section 16(2)(c) of the Acts.
- Reliance on a Supreme Court decision regarding eligibility and availing of
input tax credit based on taxpayer-maintained records rather than the GST
common portal.

4. The appellant argues that the levied interest of Rs. 2,31,318/- is not
justified as the provisions under which interest is levied are unclear, and the
quantification of interest is not discernible from the order of adjudication.

5. Similarly, the appellant contests the levied penalty of Rs. 34,016/-, stating
that the provisions under which the penalty is levied are unclear, and the
quantification of the penalty is not discernible from the order of adjudication.

6. The appellant requests leave to modify the grounds of appeal and to submit
written submissions during the appeal hearing.

7. Ultimately, the appellant prays for the appeal to be allowed and appropriate
relief to be granted in the interest of justice and equity.

PRAYER:
Therefore, the appellant respectfully requests the Hon'ble Appellate Authority
to consider the following:
A) To declare the order of adjudication dated 04.08.2022, bearing No. ACCT
(AJ-1.5/GST (Adt)-2/2022-23 T.No. 165/22-23, passed under section 73(9) of
the CGST Act and KGST Act, as not in accordance with the law and
consequently liable to be quashed. Furthermore, to delete or cancel entirely
the levy and demand of tax, interest, and penalty for the advancement of
substantial justice based on the facts and circumstances of the case.
B) To set aside the summary of the order issued in DRC-07, bearing Order
No. 230358333 dated 04.08.2022, consequent upon setting aside the above
order of adjudication.
C) To grant any other reliefs that the Hon'ble Appellate Authority may deem
fit based on the facts and circumstances of the case.

APPELLANT ARGUMENTS:

 ULTRA VIRES AND ONEROUS:

The appellant contends that Section 16(2)(c) of the CGST/KGST Act, 2017,
mandating actual payment by the supplier for input tax credit, is unduly
burdensome and impractical (Paragraph 15).
They argue that this provision contravenes the legal maxim "LEX NON
COGIT AD IMPOSSIBILIA," which asserts that the law cannot compel
individuals to perform impossible tasks This legalmaximhas beenfurther
approved in the decision of Hon'ble Supreme Court in the case of
Krishnaswamy Bros reported in 281 ITR 305 (SC). (Paragraph 17).
Moreover, they assert that Section 16(2)(c) is both arbitrary and onerous,
rendering it unconstitutional (Paragraph 18). This position finds support in the
Delhi High Court's decision in Arise India Ltd. v. Commissioner of Trade &
Taxes, where similar provisions in the Delhi VAT Act were deemed
unconstitutional unless narrowly interpreted (Paragraph 18).
The principles established in this case have been reaffirmed in the GST
regime, as acknowledged by both the GST Council and the Central Board of
Indirect Taxes and Customs (CBIC) (Paragraphs 19-20).
The petitioner highlights two significant press releases:
In the PIB Press Release dated 04.05.2018, summarizing the decisions of the
27th GST Council meeting, it was stated that there would be no automatic
reversal of input tax credit from the buyer due to non-payment of tax by the
seller. Instead, recovery would primarily be made from the seller. However,
the option of reversing credit from the buyer would be available to address
exceptional circumstances such as a missing dealer, closure of business by the
supplier, or lack of adequate assets by the supplier. Thus, the petitioner argues
that recovery against the buyer should only occur in exceptional cases, and it
constitutes secondary liability rather than primary liability (Paragraph 21).

Similarly, in the CBIC Press Release dated 30.07.2018, this stance was
reiterated and further specified. It was emphasized that there would be no
automatic reversal of input tax credit at the recipient's end if the tax had not
been paid by the supplier. Recovery, in case of default by the supplier, would
be primarily made from the supplier. However, in exceptional circumstances
such as a missing taxpayer, closure of the supplier's business, or connivance
between the recipient and the supplier, recovery of input tax credit from the
recipient would occur through due process of service of notice and issuance
of orders (Paragraph 22). These press releases emphasize the government's
intention to ensure fairness in the recovery process and to reserve actions
against the buyer for truly exceptional situations. Notably, press releases by
PIB and CBIC emphasize that recovery from the buyer for non-payment by
the supplier should only occur in exceptional circumstances (Paragraphs 21-
22).
Furthermore, CBIC clarifies that GSTR-2A is merely a tool for taxpayer
facilitation and does not dictate input tax credit eligibility (Paragraph 23).

The Supreme Court's ruling in Union of India Vs. Bharti Airtel Ltd
reinforces this stance, highlighting that eligibility for input tax credit should
be based on the taxpayer's records rather than GSTR-2A “The GSTR-2A is
only a facilitator and not the final determinant of the eligible ITC amount.
“(Paragraph 24).
Additionally, the Supreme Court underscores the importance of self-
assessment based on the taxpayer's records for determining input tax credit
eligibility (Paragraph 25).

 GENUINE AND BONAFIDE TRANSACTIONS:

The petitioner cites several cases to emphasize the importance of

genuine and bona fide transactions:
 In Suncraft Energy (P.) Ltd. [2023] 153 taxmann.com 81 (Calcutta), it
was ruled that if the revenue reverses input tax credit alleging non-
reflection of supplier's invoices in GSTR 2A, action against the supplier
is essential before seeking reversal from the assessee. The Supreme
Court dismissed the department's Special Leave Petition (SLP),
affirming this decision ([2023] 157 taxmann.com 352 (SC) [14-12-
2023]) (Paragraph 26).

LGW Industries Ltd v. Union of India [2022] 134 taxmann.com 42

(Calcutta) directed authorities to reconsider cases of input tax credit
entitlement, considering evidence of genuineness of transactions and
compliance with statutory obligations (Paragraph 27).

In D.Y. Beathel Enterprises v. The State Tax Officer (Data Cell) W.P.
(MD) No. 2127 of 2021, the Madras High Court criticized authorities
for excluding transactions without taking action against the seller for tax
non-payment (Paragraph 28).

The Kerala High Court, in Diya Agencies v. State Tax Officer [2023]
154 taxmann.com 421 (Kerala), emphasized that if evidence proves
genuine transactions, input tax credit should not be denied solely based
on GSTR-2A discrepancies (Paragraph 29).

The petitioner argues that it has demonstrated the genuineness of

transactions and the payment of GST by one party. Hence, there's no
justification for denying input tax credit (Paragraph 30).

 ITC CANNOT BE DENIED WITHOUT FIRST TAKING ACTION

AGAINST SUPPLIER:
Furthermore, the petitioner asserts that tax authorities must verify the
tax payment status by the seller and cannot solely rely on online records
like GSTR-2A. Action against defaulting suppliers should be taken
before burdening the buyer (Paragraphs 31-33).

The judgment in Suncraft Energy (P.) Ltd. [2023] 153 taxmann.com 81

(Calcutta) supports this argument, stating that action against the seller is
essential before demanding reversal of input tax credit from the buyer
(Paragraph 34). The Supreme Court's dismissal of the department's SLP
further reinforces this stance.
  UNJUST ENRICHMENT / DOUBLE BENEFIT TO STATE IS
NOT PERMISSBLE:

The appellant contends that denying input tax credit could result in
unjust enrichment or double benefit to the state, especially if the tax
authorities have already taken action and recovered taxes from the
suppliers. This situation goes against principles of tax jurisprudence
(Paragraph 35).

They cite a recent judgment by the Madras High Court in Pinstar

Automotive India (P.) Ltd. [2023] 149 taxmann.com 13 (Madras),
which highlights the concept of substantive liability falling on the
supplier and protective liability on the purchaser. If the tax liability is
met by reversal of input tax credit and recovery from the supplier, it
amounts to a double benefit to the revenue. Thus, any reversal of credit
should be a protective move, to be reversed and credit restored if the
liability is made good by the supplier (Paragraph 36).

The appellant also seeks the opportunity for cross-examination of the

parties involved, emphasizing that this right is fundamental to the
principles of natural justice. Denial of this right would amount to a
violation of natural justice, potentially rendering the order invalid. They
cite Andaman Timber Industries v. Commissioner of Central Excise,
Kolkata-II [2015] 62 taxmann.com 3 (SC) in support of this argument
(Paragraph 37).

In conclusion, the appellant requests that the appeal be allowed,

justice be rendered, and further opportunity for personal hearing
be granted to clarify any factual positions and discuss the legal
issues involved.

RESPONDENT ARGUMENT:
1. ULTRA VIRES AND ONEROUS:
 Validity of Section 16(2)(c) of CGST/KGST Act:
The provision requiring actual payment by the supplier for input tax credit is
not onerous or impossible but rather serves to ensure fiscal discipline and
prevent tax evasion.
Commissioner of Central Excise, Mumbai v. M/s Fiat India Ltd. (2012) 31
STR 49 (SC): The Supreme Court upheld the validity of similar provisions in
the Central Excise Act, emphasizing their importance in revenue collection.
The maxim "LEX NON COGIT AD IMPOSSIBILIA" does not apply in this
context as compliance with tax laws, including payment by the supplier, is
essential for maintaining the integrity of the tax system.
 While press releases and policy statements may reflect government
intent, they do not supersede the explicit provisions of tax laws.
Government of India v. Rajasthan Spinning and Weaving Mills Ltd. (2009)
23 VST 476 (SC): The Supreme Court held that policy statements cannot
override statutory provisions.
The press releases cited by the appellant are for taxpayer facilitation and do
not alter the legal requirement of payment by the supplier for input tax credit
eligibility.
 Arise India Ltd. v. Commissioner of Trade & Taxes (W.P.(C) No. 2106
OF 2015, dated 26-10-2017): While the Delhi High Court's decision in
this case may have relevance, it does not undermine the validity Of
Section 16(2)(c) of the CGST/KGST Act.
The decisions cited by the appellant are specific to their contexts and do
not invalidate the requirement of payment by the supplier for input tax
credit eligibility under GST laws.
 Role of GSTR-2A:
Union of India v. Bharti Airtel Ltd. (2021) 131 taxman.com 319 (SC): The
Supreme Court clarified that GSTR-2A is a facilitator and not the final
determinant of eligible input tax credit.
Taxpayers are responsible for maintaining accurate records and
undertaking self-assessment based on their books of account, as
emphasized by the Supreme Court.
2.GENUINE AND BONAFIDE TRANSACTIONS:
 Validity of Input Tax Credit Denial:
The denial of input tax credit cannot be solely based on the absence of
reflection in GSTR-2A. It should be based on comprehensive verification and
assessment of all relevant documents and evidence.
CCE, Mumbai v. Fiat India Ltd. (2012) 31 STR 49 (SC): The Supreme Court
upheld the validity of denying input tax credit if discrepancies are found in
compliance with tax laws.
While the judgments cited by the petitioner emphasize the necessity of action
against the supplier before demanding reversal of input tax credit, they do not
negate the authority of tax authorities to scrutinize transactions for
compliance.
 It is the responsibility of the tax authorities to verify the actual payment
status by the seller before making any demands on the buyer.
Suncraft Energy (P.) Ltd. v. GST Department (2023) 153 taxmann.com 81
(Calcutta): This case emphasizes the need for action against the supplier
before demanding reversal of input tax credit from the buyer.
The dismissal of the department's SLP in the Supreme Court signifies the
importance of taking appropriate action against the defaulting supplier before
burdening the buyer.
 The petitioner's argument about the need for exceptional circumstances
like collusion between the buyer and the supplier or non-payment by the
supplier lacks merit.
LGW Industries Ltd v. Union of India (2022) 134 taxmann.com 42
(Calcutta): The Calcutta High Court directed authorities to consider the
genuineness of transactions and compliance with statutory obligations before
granting input tax credit.
The judgments cited by the petitioner underscore the importance of
scrutinizing transactions for their genuineness and compliance, irrespective of
the supplier's actions.
 Tax authorities have a duty to conduct thorough investigations and
assessments to ascertain the actual payment status and compliance by
both the buyer and the seller.
D.Y. Beathel Enterprises v. The State Tax Officer (2021) (Madurai Bench):
The Madras High Court criticized authorities for overlooking evidence of tax
payment by the seller and emphasized the need for proper assessment.
The burden is on the tax authorities to demonstrate non-payment by the
supplier and collusion between the buyer and the supplier, if any, before
demanding reversal of input tax credit from the buyer.

3.ITC CANNOT BE DENIED WITHOUT FIRST TAKING ACTION

AGAINST SUPPLIER:

 Verification of Tax Payment:

While it is important for tax authorities to verify the actual payment status by
the seller, reliance solely on GSTR-2A is not the practice. Tax authorities
conduct comprehensive assessments, including scrutinizing other relevant
documents and evidence.
Commissioner of Customs (Imports) v. Dilip Kumar and Company (2018)
13 SCC 446: The Supreme Court emphasized the authority of tax authorities
to conduct thorough investigations beyond electronic records.
The petitioner's assertion that reliance is placed solely on GSTR-2A
overlooks the multifaceted approach taken by tax authorities in verifying tax
payments.

 Possibility of Tax Payment:

The possibility that the supplier may have paid taxes by cash or adjusted
against Input Tax Credit (ITC) is speculative without concrete evidence. Tax
authorities must follow due process and ascertain the actual payment status
before concluding.
CCE, Mumbai v. Fiat India Ltd. (2012) 31 STR 49 (SC): The Supreme
Court upheld the importance of concrete evidence and compliance before
granting input tax credit.
Mere speculation about the supplier's payment methods does not absolve the
buyer of their responsibility to ensure compliance with tax laws.
  Responsibility of Tax Authorities:
While it is acknowledged that tax authorities have a responsibility to verify
tax payments and take action against defaulting suppliers, this does not
absolve the buyer of their obligations under the law.
Assistant Commissioner v. Sterling Foods (2017) 82 VST 369 (Madras HC):
The Madras High Court emphasized the shared responsibility of buyers and
sellers in ensuring tax compliance.
Tax authorities must ensure fairness and due process but cannot overlook the
buyer's responsibility to ensure compliance with tax laws.

 Court Judgments and Dismissal of SLP:

The judgment cited by the petitioner emphasizes the importance of action
against the supplier before demanding reversal of input tax credit. However,
each case is unique, and blanket application of this principle may not be
appropriate.
Dismissal of SLP in Suncraft Energy (P.) Ltd. does not preclude tax
authorities from exercising their discretion based on the facts and
circumstances of each case.
The dismissal of SLP does not necessarily establish precedence but rather
reflects the Supreme Court's decision not to interfere in a specific case.

4. UNJUST ENRICHMENT / DOUBLE BENEFIT TO STATE IS NOT

PERMISSIBLE:

 Double Benefit to the Revenue:

While it is acknowledged that double benefit to the revenue is against the
principles of tax jurisprudence, it is essential to ensure that the burden of tax
payment falls on the appropriate party.
Commissioner of Central Excise, Mumbai v. Fiat India Ltd. (2012) 31 STR
49 (SC): The Supreme Court emphasized the importance of ensuring that the
burden of tax payment falls on the appropriate party and that unjust
enrichment is avoided.
While recovery of taxes from suppliers may occur, it does not absolve the
buyer of their responsibility to comply with tax laws. Denial of input tax
credit may be necessary to ensure fairness and compliance with tax laws.

 Substantive and Protective Liability:

The concept of substantive liability falling on the supplier and protective
liability on the purchaser, as outlined in Pinstar Automotive India (P.) Ltd.,
does not imply absolute immunity for buyers from tax liabilities.
Union of India v. Dharmendra Textile Processors (2008) 13 SCC 369: The
Supreme Court emphasized that substantive liability must be fulfilled by the
appropriate party under tax laws.
While the appellant seeks to characterize denial of input tax credit as a
violation of natural justice, it is essential to recognize that tax authorities have
a duty to ensure compliance and prevent unjust enrichment.

 Right to Cross-Examination:
While the right to cross-examination is indeed a facet of natural justice, its
application must be weighed against the broader principles of fairness and
efficiency in tax administration.
State of Punjab v. Ram Lubhaya Bagga AIR 1998 SC 3071: The Supreme
Court emphasized that procedural fairness must be balanced against the need
for efficient tax administration.
Denial of input tax credit or other tax-related decisions cannot be invalidated
solely on the basis of denial of cross-examination if other procedural
safeguards are followed and substantive justice is achieved.
 SIMILAR CASE LAWS:
1. Nahasshukoor vs. Assistant Commissioner [WA NO. 55440 OF
2020]: HIGH COURT OF KERALA AT ERNAKULAM
FACTS:

 The appellants (M/s. N.S Metals and M/s.Light House) were denied input tax
credit under the CGST and SGST Acts due to discrepancies between their
GSTR 2A and GSTR 3B returns.
 The Assessing Authority levied interest, penalty, and initiated recovery
proceedings against them.
 The appellants challenged the assessment order and the constitutional validity
of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules in the
writ court.
 The writ court dismissed their petitions, and they appealed to the High Court.
PARAGRAPH 3

ISSUES:

 Whether the appellants are entitled to input tax credit despite the
discrepancies in their GSTR returns. PARAGRAPH 4
 Whether Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST
Rules are unconstitutional for violating Article 14 of the Constitution.
PARAGRAPH 9

PETITIONER ARGUMENTS:

 The appellants argued that they were entitled to input tax credit even though
they did not have tax invoices from the supplying dealers. PARAGRAPH 8
 They challenged the constitutionality of the impugned provisions, claiming
they discriminated against purchasing dealers and forced them to ensure
compliance by the supplying dealers, which is arbitrary and illegal.
PARAGRAPH 9
 RESPONDENTS ARGUMENTS:

 The respondents argued that input tax credit is a conditional benefit, and the
appellants failed to fulfill the conditions by not producing tax invoices.
PARAGRAPH 5
 They defended the constitutionality of the impugned provisions, stating that
they prescribe reasonable conditions for availing the benefit and do not
discriminate against any party. PARAGRAPH 10


JUDGEMENT:

 The High Court dismissed the appeals. PARAGHARP 14

 It agreed with the respondents that input tax credit is a conditional
benefit, and the appellants failed to produce the required documents.
PARAGRAPH 6
 The court rejected the challenge to the constitutionality of the impugned
provisions, finding no discrimination or manifest arbitrariness. PARAGRAPH
10

CONCLUSION:

The High Court upheld the assessment orders and the constitutionality of the
impugned provisions. The appellants have the right to challenge the
assessment orders through alternative legal remedies. PARAGRAPH 14

2. LGW Industries Limited & ors. Vs. Union of India & ors. [W.P. No.
23512 (W) OF 2019]:

FACTS:
 The petitioner comprises a company incorporated under the Companies
Act, 1956, with its registered office located in Kolkata. Additionally, it
includes a shareholder and director who is a citizen of India. Paragraphs
2.1, 2.2
 The cause of action for the petition arises within the territorial
jurisdiction of the court.
 The petitioner company is registered under both the Central Goods and
Services Tax Act (CGST Act) and the West Bengal Goods and Services
Tax Act (WBGST Act). Paragraphs 2.3, 2.4
The petitioner company operates as a merchant exporter dealing in
various goods such as jewelry, footwear, cosmetics, and engineering
goods.
Allegations include the receipt of a notice demanding reversal of Input
Tax Credit (ITC) due to alleged irregularities in supplier registrations.
Paragraphs 2.5, 2.6, 2.6, 2.15
 The petitioner received multiple notices and attended hearings
concerning the demand for ITC reversal.
They made representations through authorized representatives,
requested adjournments, and responded to the notices. Paragraphs 2.6,
2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14
 The petitioner asserts compliance with all legal requirements, including
the possession of valid tax invoices and payment through proper
banking channels.
They claim to have exercised due diligence by verifying supplier
registrations on the GSTN portal and matching purchases with auto-
generated Form GSTR 2A. Paragraphs 2.19, 2.20
 The petitioner challenges the constitutional validity of Section 16(2)(c)
of the CGST Act and WBGST Act, seeking relief under Article 226 of
the Constitution.
They request the quashing of proceedings and affirm their rights to
conduct business without prejudice. Paragraphs 2.22, 3

PETITIONER ARGUMENTS

 Unconstitutionality of Section 16(2)(c):The petitioner challenges the

constitutionality of Section 16(2)(c) of the CGST Act and WBGST Act,
which denies Input Tax Credit (ITC) to buyers if the tax charged by
suppliers has not been paid to the Government. It is argued that this
provision is arbitrary and against the scheme of the Acts. Paragraphs: 1,
2.22

They highlight the unfairness of denying ITC solely based on the

unknown status of their suppliers' tax payments, as they have no access
to the suppliers' returns (para 2.21).

 2. Issue of Demand for Reversal of ITC:

 The petitioners point out several procedural flaws in the authorities'
actions

The petitioner received a notice demanding reversal of ITC along with

interest and penalty due to alleged irregularities in supplier registrations.
However, the petitioner asserts that all purchases were based on legally
valid invoices, and it had no means to verify supplier registration details
beyond what was available on the GSTN portal. Paragraphs: 1, 2.6, 2.15

They emphasize the authorities' disregard for GSTR-2A, a system-

generated document that authenticates their purchases, raising concerns
about the basis for demanding ITC reversal (para 2.16).
 3. Violation of Natural Justice:
The petitioner alleges a violation of principles of natural justice, stating
that their detailed reply to the notice was disregarded without proper
justification. Despite efforts to engage with the authorities and provide
explanations, the respondent failed to consider the petitioner's
perspective adequately. Paragraphs: 1, 2.12, 2.13
 4. Due Diligence:

The petitioner asserts that they exercised due diligence by verifying supplier
registrations on the GSTN portal and matching purchases with auto-generated
Form GSTR 2A. They argue that they had no means to ascertain the
authenticity of supplier documents beyond what was available to them.

GSTR-2A Matching: They emphasize that their purchases matched the

information in GSTR-2A, further confirming their bona fide transactions
(para 2.16).

Transparent Payments: They underline the transparency of their

transactions, highlighting all payments made through regular banking
channels (para 2.17).

 5. Compliance:
The petitioners demonstrate their willingness to cooperate:

Paid Demanded Amount: They point out paying the demanded ITC amount
despite contesting its legality (para 2.9).

Exports: They emphasize that all purchased goods were subsequently

exported, fulfilling their tax obligations (para 2.18).
  6. Constitutional Challenge and Request for Relief:
The petitioner seeks relief under Article 226, challenging the constitutionality
of Section 16(2)(c) of the CGST Act and WBGST Act. They request the
quashing of the proceedings and assert their rights to carry on business
without prejudice. Paragraphs: 2.22, 3
The petitioner challenges the constitutional validity of provisions denying
Input Tax Credit (ITC) to buyers when suppliers fail to remit taxes. They
argue that such provisions are arbitrary, unjustly burden buyers with verifying
supplier tax compliance, and effectively shift the tax burden from suppliers to
buyers, contrary to GST objectives. Additionally, the denial of ITC impedes
business operations, violates property rights, and contradicts principles of
equality before the law. The petitioner contends that buyers fulfill all
conditions for claiming ITC, undertake reasonable verification measures, and
rely on valid registration certificates. They highlight the impracticality and
unfairness of expecting buyers to avoid suppliers with fraudulent registrations
and emphasize the need for buyer protection in ITC matters. Seeking legal
recourse through the courts is presented as the only viable option for
addressing these concerns, which present novel legal challenges not
previously adjudicated upon.
RESPONDENT ARGUMENT:
 Lawful Government Actions: The Union of India and other respondents
argue that the actions or regulations imposed are lawful and necessary
for various reasons such as public interest or regulatory compliance.
 Justification for Actions: They may provide reasons or justifications for
the actions taken and argue that they are in the best interest of the public
or for regulatory purposes.

JUDGEMENT:
 Judicial Review: The court will conduct a thorough review of the
actions or regulations in question to determine their legality and
compliance with existing laws.
 Assessment of Impact: The court will also assess the impact of the
actions or regulations on the petitioners' rights or interests.
  Decision: Based on the review and assessment, the court will issue a
judgment either upholding the actions or regulations or providing relief
to the petitioners if their rights have been infringed upon.

CONCLUSION:
 The outcome of the case will depend on the court's interpretation of the
law and its assessment of the impact of the government's actions or
regulations on the petitioners' rights. The judgment will provide clarity
on the legality and validity of the actions in question and may establish
precedents for similar cases in the future.

3. M/s. Ashapura Polytex Ltd. Vs. CCE, Surat-I [2019 (36) GSTL 252
(Tribunal)]:

FACTS:
1. M/s. Ashapura Polytex Ltd. is a company engaged in the manufacturing of
textile products. 2. The company availed CENVAT credit on inputs,
capital goods, and input services in accordance with the provisions of the
Central Excise Act.
3. During an audit conducted by the Central Excise Department, certain
irregularities were discovered in the availing and utilization of CENVAT
credit by the company.

ISSUES:
1. Compliance with Central Excise Act: Whether M/s. Ashapura Polytex Ltd.
complied with the provisions of the Central Excise Act concerning the
availing and utilization of CENVAT credit. 2. Severity of Irregularities:
Whether the irregularities identified by the Central Excise Department were
significant and warranted penal action against the company.

PETITIONERS ARGUMENTS:
1. Compliance Affirmation: M/s. Ashapura Polytex Ltd. asserted that they had
strictly adhered to the provisions of the Central Excise Act regarding the
availing and utilization of CENVAT credit.
2. Minor Nature of Irregularities: They argued that any irregularities found
were minor and unintentional, without any deliberate intent to evade taxes.

RESPONDENT ARGUMENTS:
1. Allegation of Misuse: The Central Excise Department alleged that M/s.
Ashapura Polytex Ltd. had misused the provisions of the Central Excise Act
by irregularly availing and utilizing CENVAT credit.
2. Significant Irregularities: They claimed that the irregularities were
substantial and deliberate, indicating a deliberate attempt to evade tax
liabilities.

JUDGEMENTS:
1. Examination: The Tribunal meticulously examined the evidence and
submissions presented by both parties.
2. Findings: After thorough scrutiny, the Tribunal determined that while there
were indeed irregularities in the availing and utilization of CENVAT credit by
M/s. Ashapura Polytex Ltd., these irregularities were minor and unintentional.
3. Absence of Deliberate Misconduct: There was no evidence to suggest
deliberate misconduct or misuse of provisions by the company.
4. Decision: Consequently, the Tribunal ruled in favor of M/s. Ashapura
Polytex Ltd. and revoked the penalties imposed by the Central Excise
Department.

CONCLUSION:
The Tribunal's decision highlighted the significance of distinguishing between
minor procedural lapses and deliberate tax evasion attempts. It underscored
the principle of proportionality in imposing penalties, emphasizing that
penalties should correspond to the seriousness of the offense. In this case, the
Tribunal concluded that the irregularities were minor and unintentional, thus
warranting the revocation of penalties imposed by the Central Excise
Department.
4. M/s. Balkrishna Industries Ltd. Vs. CCE, Surat-I [2019 (35) GSTL 180
(Tribunal)]:

FACTS:
1. M/s. Balkrishna Industries Ltd. is a company involved in the manufacturing
of tires and tubes.
2. The company availed CENVAT credit on inputs, capital goods, and input
services as per the provisions of the Central Excise Act.
3. A Central Excise Department audit revealed certain irregularities in the
availing and utilization of CENVAT credit by the company.

ISSUES:
1. Compliance with Central Excise Act: Whether the availing and utilization
of CENVAT credit by M/s. Balkrishna Industries Ltd. adhered to the
provisions of the Central Excise Act.
2. Magnitude of Irregularities: Whether the irregularities identified by the
Central Excise Department were substantial and warranted penal action
against the company.

PETITIONERS ARGUMENTS:
1. Compliance Assertion: M/s. Balkrishna Industries Ltd. contended that they
had strictly followed the provisions of the Central Excise Act regarding the
availing and utilization of CENVAT credit.
2. Nature of Irregularities: They argued that any irregularities found were
minor and unintentional, not indicative of deliberate evasion or misuse of
provisions.

RESPONDENT ARGUMENTS:
1. Misuse Allegation: The Central Excise Department asserted that M/s.
Balkrishna Industries Ltd. had misused the provisions of the Central Excise
Act by irregularly availing and utilizing CENVAT credit.
2. Substantiality of Irregularities: They claimed that the irregularities were
significant and deliberate, suggesting a deliberate attempt to evade taxes.

JUDGEMENT:
1. Scrutiny: The Tribunal carefully examined the records and submissions
from both parties.
2. Findings: It was found that while there were indeed irregularities in the
availing and utilization of CENVAT credit by M/s. Balkrishna Industries Ltd.,
these irregularities were minor and unintentional.
3. Absence of Deliberate Evasion: There was no evidence to suggest
deliberate evasion or misuse of provisions by the company.
4. Decision: Therefore, the Tribunal ruled in favor of M/s. Balkrishna
Industries Ltd. and set aside the penalties imposed by the Central Excise
Department.
CONCLUSION:
The Tribunal's decision underscored the importance of distinguishing between
minor procedural irregularities and deliberate tax evasion attempts. It
emphasized the principle of proportionality in imposing penalties, advocating
that penalties should align with the gravity of the offense. In this instance, the
Tribunal concluded that the irregularities were minor and unintentional,
rendering the penalties unwarranted.

ADDITIONAL PETITIONERS ARGUMENTS:

It is violative of Article 14 of the Constitution as it treats both bona fide ITC

claimants and fraudulent ITC claimants the same manner. Denying ITC to a
buyer of goods and services would tantamount to treating both the ‘guilty
purchasers’ and the ‘innocent purchasers’ at par whereas they constitute two
different classes. This is violative of Article 14 of the Constitution inasmuch
as it treats both the ‘innocent purchasers’ and the ‘guilty purchasers’ alike.
Therefore it punishes both the perpetrator of the fraud and the victim and treat
both of them on an equal footing which is totally in contradiction with the
mandate contained under Article 14 of the constitution, which provides that
the equals are to be treated equally. Manifest Arbitrariness and Irrational-
  Joseph Shine vs. Union of India AIR 2018 SC 4898;
 Navtej Singh Joharvs. Union of India (2018) 1 SCC 791;
 Hindustan Construction Company Limited &Anr. Vs Union of
India &Ors. (W.P. (C) 1074/2019);
 Sharma Transport v. State of Andhra Pradesh (2002) 2 SCC 188;
 ShayaraBano and Ors. v. Union of India, AIR 2017 SC 4609.

ITC is the property that belongs to the business man. It is not be deprived due
to the supplier fault. It is therefore, violative of Article 300A of Constitution
as it deprives us from the right to proprerty .

It is an arbitrary provison. The Supreme Court further observed that In Union

of India & Ors. V. Tushar Ranjan Mohanty & Ors., (1994) 5 SCC
450, this Court declared the amendment with retrospective operation as ultra
vires as it takes away the vested rights of the petitioners therein and thus, was
unreasonable, arbitrary and violative of Articles 14 and 16 of the Constitution.
While deciding the said case, this Court placed very heavy reliance on the
judgment in P.D. Aggarwal & Ors. v. State of U.P. & Ors., AIR
1987 SC 1676, wherein this Court has held as under: “…the Government has
power to make retrospective amendments to the Rules but if the Rules purport
to take away the vested rights and are arbitrary and not reasonable then such
retrospective amendments are subject to judicial scrutiny if they have
infringed Articles 14 and 16 of the Constitution.”

How sec.16 (2)(c) of GST affects dealer/ traders?

The heart of the controversy revolves around the interpretation of section
16(2)(c) of the CGST Act, which states that a recipient is eligible for ITC
only if the tax levied on the supply of goods has been deposited with the
government by the supplier. The bare provision of section 16(2)(c) of the
CGST Act reads:
“Notwithstanding anything contained in this section, no registered person
shall be entitled to the credit of any input tax in respect of any supply of
goods or services or both to him unless, –– subject to the provisions of section
41 or section 43A, the tax charged in respect of such supply has been actually
paid to the Government, either in cash or through the utilization of input tax
credit admissible in respect of the said supply;” [emphasis added]
The provision becomes troublesome if the words “has been actually paid to
the Government” is interpreted to mean that it is the duty of the recipient to
ensure that the tax paid by them on goods supplied by the supplier is actually
transferred to the purse of the government by the supplier. This means that an
additional burden will be placed on the claimant to cross-check whether the
supplier has paid the tax to the government failing which, the claimant would
not be entitled to ITC under the law. This risks the position of a bona fide
purchaser who is precluded from claiming ITC even when the default occurs
on the part of the supplier and not the claimant as is the case in the present
matter. It is pertinent to note that this issue is not an alien one and was a
highly debated issue even in the pre-GST regime. The jurisprudential position
surrounding this issue can be understood from the following judicial
decisions.
In a significant ruling in 2013, the Supreme Court in Commissioner of Central
Excise, Jalandhar v. Kay Kay Industries, while allowing the recipient
(respondent) to claim MODVAT credit even when the supplier had defaulted
in his duty to pay tax received from the recipient on inputs to the department,
held that “an assessee is not expected to verify with Department whether the
supplier had paid duty on inputs or not supplied by Manufacturer-Supplier in
order to avail deemed MODVAT credit.” The Court further observed that
where the assessee has followed the prescribed procedure, it would be
unjustifiable and impractical to impose such a condition and would instead
lead to transactions getting delayed.

THE WAY FORWARD

The Court must therefore recognize the arbitrariness of section 16(2)(c )
either ‘strike down’ the provision completely or ‘read down’ the provision so
it comes into application only in certain cases. While supporting the Delhi
High Court’s judgement that ruled in favour of assesses, a Bench led by
Justice RF Nariman said that “There can be no doubt that the third proviso to
Section 254(2A) of the Income Tax Act. Introduced by the Finance Act, 2008,
would be both arbitrary and discriminatory, and, therefore liable to be struck
down for violating Article 14 of the Indian Constitution."

In 2017, the Supreme Court struck down a statute or a part of a statute as

being unconstitutional in 5 cases.
In Nikesh Tarachand Shah v Union of India, the Supreme Court struck
down the 2012 Amendment to the Prevention of Money Laundering Act
2002.
In Maharashtra Forest Guards and Foresters Union v State of
Maharashtra, the Supreme Court struck down the Rule 7(1)(a) of the
Forester (Recruitment) Rules, 1987, inserted in 2013.
In Independent Thought v Union of India, the Supreme Court read down the
exception to Section 375 of the Indian Penal Code, holding the exception as
unconstitutional to that extent. The exception, which creates an exception to
the offence of rape in cases of forced sexual intercourse by a man with his
own wife if she is of 15 years of age or above, has not been amended
since 1978.
In Bimolangshu Roy v State of Assam, the Supreme Court struck down the
Assam Parliamentary Secretaries (Appointment, Salaries, Allowances and
Miscellaneous Provisions) Act, 2004, holding that the Legislature of Assam
was not competent to pass it.
In Maharishi Markandeshwar Medical College and Hospital v State of
Himachal Pradesh, the Supreme Court struck down Sections 3(6), 3(6a) and
3(6b) of the Himachal Pradesh Private Medical Educational Institutions
(Regulation of Admission and Fixation of Fee) Act 2006, inserted in 2015.
In the matter of Arise India Ltd. v. CTT [WP(C) 2106 of 2015, dated 26- 10-
2017], the Delhi High Court – “It can be safely concluded in the present case
that there is a singular failure by the legislature to make a distinction between
purchasing dealers who have bona fide transacted with the selling dealer by
taking all precautions as required by the DVAT Act and those that have not.
Therefore, there was need to restrict the denial of ITC only to the selling
dealers who had failed to deposit the tax collected by them and not punish
bona fide purchasing dealers. The latter cannot be expected to do the
impossible. It is trite that a law that is not capable of honest compliance will
fail in achieving its objective. If it seeks to visit disobedience with
disproportionate consequences to a bona fide purchasing dealer, it will
become vulnerable to invalidation on the touchstone of Article 14 of the
Constitution”.
CONCLUSION
Further, there should be a mechanism set up to track payment by supplier
against a particular invoice to avoid any undue hardships on recipients. It is
ostensible that section 16(2)(c) of CGST Act 2017 in its present form is
susceptible to an interpretation that imposes a duty on the recipient to
crosscheck whether GST has been remitted by the supplier to the government
for the invoice on which ITC has been collected from the recipient. However,
under the current GST mechanism, it is an uphill task for businesses to
determine whether or not the supplier has filed the tax to the government.
This places businesses in a precarious situation where they are expected to
determine whether the intentions of the suppliers are opportune or not.
Adding to the woes of the businesses is the provision of reversal of ITC along
with interest which clearly goes against the spirit of GST to facilitate ease of
doing of businesses in the nation. Hence, it is imperative that the government
seriously reconsider the above provisions and bring about a corresponding
amendment in the GST law to eradicate the hardship faced by the recipients in
claiming ITC.