Page 1 of 38

(W.P.(T)No.191/2022)

AFR

HIGH COURT OF CHHATTISGARH, BILASPUR

Writ Petition (T) No.191 of 2022

Order reserved on: 20-10-2023

Order delivered on: 11-12-2023

M/s Jain Brothers, Thakur Road, Jagdalpur, Bastar,

Chhattisgarh, Through its Proprietor Shri Amit Jain, Aged

about 46 (Forty Six) years, S/o Shri Surendra Kumar Jain,

R/o Thakur Road, Sardar Ward No.10, Jagdalpur,

Chhattisgarh

---- Petitioner

Versus

1.Union of India, Through its Secretary, Department of

Revenue, At North Block, New Delhi.

2.State of Chhattisgarh, Through its Secretary, Commercial

Tax-GST Department, Mantralaya, Mahanadi Bhavan, Naya

Raipur, Chhattisgarh.

3.Superintendent, Central GST & Central Excise, Range-IV,

Division-IV, Swapnil Bhawan, Shanti Nagar, Near CMO,

Jagdalpur, Chhattisgarh.

4.Assistant Commissioner, Central Goods and Services Tax,

Division-IV, GST Bhawan, Tikrapara, Raipur, Chhattisgarh.

5.Principal Commissioner, Central Goods and Services Tax,

GST Bhawan, Tikrapara, Raipur, Chhattisgarh.

---- Respondents

---------------------------------------------------------------------------------

For Petitioner:Mr. Palash Soni, Advocate, through Video Conferencing.

For Respondent No.1 / Union of India: -

Mr. Ramakant Mishra, Deputy Solicitor General of India

and Ms. Anmol Sharma, Advocate.

For Respondent No.2 / State: -

Mr. Amrito Das, Additional Advocate General.

For Respondents No.3 to 5: -

Mr. Ashutosh Singh Kachhawaha and Ms. Shruti

Pramar, Advocates.

Amicus Curiae:Mr. Neelabh Dubey, Advocate.

---------------------------------------------------------------------------------

Hon'ble Mr. Sanjay K. Agrawal and

Hon'ble Mr. Radhakishan Agrawal, JJ.

O b ject 2O b ject 1 2023:CGHC:32289-DB

Neutral Citation

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(W.P.(T)No.191/2022)

C.A.V. Order

Sanjay K. Agrawal, J.

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 Section 16(4) of the

CGST Act as violative of Articles 14, 19(1)(g) & 300A of the

Constitution of India and further seeks a declaration that

Section 16(4) is merely procedural in nature which cannot

override substantive conditions as mandated under Sections

16(1) & 16(2) of the CGST Act, and eventually seeks to

challenge the show cause notice dated 20-5-2022 (Annexure

P-8) in light of Section 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 Section 16(4) of the CGST Act by respondents No.3 to

5 herein.

2.The constitutional validity of Section 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 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

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 Section 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

Section 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 Section 47 of the CGST Act for the period

March, 2019 in Form GSTR-3B of April, 2019 and interest

under Section 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 Section 16(2). Returns filed under Section 39 in Form

GSTR-3B for the months of March, 2019 and April, 2019

have been annexed as Annexures P-2 & P-3. Thereafter, the

petitioner was served with a demand letter dated 6-2-2020

(Annexure P-4) by respondent No.3 demanding an amount of

₹ 9,43,919/- to be paid alleging that Input Tax Credit (ITC),

as specified above, is availed in contravention of Section

16(4) of the CGST Act along with interest under Section 50 of

the said Act, which the petitioner replied vide Annexure P-5 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

and prayed for quashment of the proceedings and not to

issue any further notice, but respondent No.3 again issued a

demand letter dated 28-1-2021 (Annexure P-6) rejecting the

grounds raised by the petitioner stating that Section 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

Section 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 Section 16(4) read with

Section 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 ₹ 9,43,920/- should

not be demanded and recovered from him under Section

73(1) of the CGST Act, interest at applicable rate should not

be demanded and recovered under Section 50 of the said Act

and penalties should not be imposed under Section 73(9) of

the said Act leading to filing of the instant writ petition

questioning the constitutional validity of Section 16(4) of the

CGST Act and eventually questioning the proceedings

initiated for recovery of ₹ 9,43,920/- along with interest and

penalties stating that the said recovery under Section 16(4)

is violative of Articles 14, 19(1)(g) & 300A of the Constitution 2023:CGHC:32289-DB

Neutral Citation

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(W.P.(T)No.191/2022)

of India and that Section 16(4) is merely procedural in

nature which cannot override substantive conditions as

mandated under Section 16(1) & 16(2) and further called in

question the recovery proceedings initiated in shape of show

cause notice dated 20-5-2022.

4.Union of India has filed its return opposing the averments

made in the writ petition stating inter alia that the writ

petition as framed and filed is not maintainable and liable to

be dismissed as premature, as the petitioner has also

challenged the show cause notice issued by respondent No.3

and same has till date not been adjudicated by the

concerned authority and after adjudication of same by the

competent authority, the petitioner has option to file appeal

before the appellate authority as per the provisions of the

CGST Act. It has further been pleaded that the provision of

Section 16(4) of the CGST Act is a constitutionally valid

provision and Section 16(4) is an integral part of the statute

and therefore the conditions prescribed by Section 16(4) for

availment of ITC are binding on the tax payer. The

availability of ITC is subject to the conditions and

restrictions and if a tax payer has not fulfilled the said

conditions including the conditions provided in Section

16(4), it cannot be allowed to avail the benefit of input tax

credit. It has also been submitted that the grant of input tax

credit under Section 16 of the CGST Act is a concession or

relaxation and nobody can claim it as a matter of vested 2023:CGHC:32289-DB

Neutral Citation

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(W.P.(T)No.191/2022)

right. It is entirely for the legislature to make a provision

and restrict the benefit or concession or relaxation either to a

class of persons or even if it extends to all, it can restrict the

term or period or limit up to which the concession can be

availed of. Similar provision has been given in the CENVAT

Credit Rules, 2004. Any registered person is eligible for

taking input tax credit, only if such availment is not

restricted by conditions laid down in the law in this regard.

It has been further submitted that Section 16(4) of the CGST

Act is neither violative of Article 14 nor violative of Articles

19(1)(g) & 300A of the Constitution and the writ petition

being premature is liable to be dismissed.

5.Respondents No.3 to 5 though have filed separate return,

but in line with return filed by respondent No.1, they have

stated inter alia that the petitioner is not entitled for the

reliefs claimed in the writ petition and the writ petition

deserves to be dismissed.

Submission of the Petitioner

6.Mr. Palash Soni, learned counsel appearing for the

petitioner, would submit that the petitioner has filed return

under Section 39 of the CGST Act for period March, 2019 on

13-11-2019 and has availed ITC of ₹ 9,43,920/-, thereafter,

respondent No.3 has issued notices vide Annexures P-4 & P-

6 seeking clarifications from the petitioner regarding late

availment of ITC in the return for March, 2019, which the 2023:CGHC:32289-DB

Neutral Citation

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(W.P.(T)No.191/2022)

petitioner has duly replied vide Annexures P-5 & P-7 and

thereafter, show cause notice has been issued to the

petitioner as to why the ITC availed in the return (Form

GSTR-3B) should not be demanded and recovered along with

applicable interest and penalty thereof. According to the

learned counsel for the petitioner, ITC means the credit for

input tax and Section 16(4) of the CGST Act provides a

restriction on taking input tax credit based on time line as

provided therewith. Whereas, Section 16(2) of the CGST Act

is a non obstante clause starting with “Notwithstanding

anything contained in this section, no registered person shall

be entitled to the credit of any input tax …”. Therefore, once

the person claiming ITC satisfies the conditions of Section

16(2) of the CGST Act, the ITC becomes a vested right and

cannot be taken away by virtue of time lines provided by the

other provision, specifically Section 16(4), as Section 16(2)

has an overriding effect over the other sub-sections of

Section 16 including Section 16(4) and once all the

conditions specified in Section 16(2) have been satisfied, the

person claiming ITC vests upon him and cannot be taken

away merely based on time lines. It is further submitted by

learned counsel for the petitioner that it is the established

principle of law that in construing the provisions of a non

obstante clause, it is necessary to determine the purpose

and object for which it was enacted, as the purpose and

object for enacting GST law was majorly to avoid the 2023:CGHC:32289-DB

Neutral Citation

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(W.P.(T)No.191/2022)

cascading effect and to have seamless flow of ITC for each

point of taxation till the end consumer. But, restricting the

ITC based on the time lines will be against the basic purpose

and object as specified. Section 16(4) of the CGST Act was

enacted to only disallow the ITC where the ITC has been

claimed after filing the return in Form GSTR-3B for

September following the financial year to which such ITC

pertains and not to disallow the ITC for a particular period if

return for the period has been filed belatedly, this

interpretation of disallowing the ITC for delay in filing of

return and claiming ITC thereof, frustrates the object of GST.

As such, sub-section (2) of Section 16 of the CGST Act is not

subjected to sub-section (4). Therefore, in case of a conflict,

if a person has satisfied all the conditions of Section 16(2) of

the CGST Act but not within the time line provided by

Section 16(4), Section 16(4) will be of no use and ITC has to

be allowed. Mr. Soni, learned counsel for the petitioner,

would also submit that Section 16(4) violates Article 14 of

the Constitution in the sense that it is far beyond the scope

and object of the Act, as one of the key features of the CGST

Act is to have uninterrupted and seamless chain of ITC. It is

an established principle of law that where a relation cannot

be established to the object sought to be achieved by the

statute, the same is in violation of Article 14 of the

Constitution. According to Mr. Soni, learned counsel for the

petitioner, Section 16(4) of the CGST Act is not an aid to ITC 2023:CGHC:32289-DB

Neutral Citation

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but is an obstruction by disallowing the ITC claimed by the

petitioner for a particular period but the returns were filed

after the due date. Section 16(4) disallows the ITC merely

based on time lines for those taxes which are already paid for

purchase of goods and/or services as the case may be. Mr.

Soni would also contend that Section 16(4) also violates

Article 19(1)(g) of the Constitution because the said provision

nowhere is covered under the ‘reasonable restrictions’ under

Article 19(6) of the Constitution. The restriction provided

therein is bad in law and is an unreasonable restriction. The

provision does not bar the filing of returns after the due date

of filing of return for September following the financial year

to which ITC pertains. Returns under Section 39 of the

CGST Act are allowed to be filed even after the due date

September following the end of financial year and therefore

the intention of law is not to bar the ITC by time lines by any

means and therefore is bad in law. Finally, it is submitted

that Section 16(4) of the CGST Act is also violative of Article

300A of the Constitution. Mr. Soni would rely upon the

decision of the Calcutta High Court in the matter of Howrah

Tax Payers’ Association v. The Government of West

Bengal and another

1

, that of the Gujarat High Court in the

matter of M/s Siddharth Enterprises through Partner

Mahesh Liladhar Tibdewal v. The Nodal Officer

2

and that

12010 SCC OnLine Cal 2520

2AIR OnLine 2019 Gujarat 355 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

of the Supreme Court in the matter of Chandavarkar Sita

Ratna Rao v. Ashalata S. Guram

3

to bolster his submission.

Submission on behalf of the Union of India: -

7.Mr. Ramakant Mishra, learned Deputy Solicitor General of

India appearing for the Union of India / respondent No.1,

would submit that the petition as framed and filed against

show cause notice would not be maintainable, as the same

has not been adjudicated by the concerned authority and

after adjudication of the same by the competent authority,

the petitioner has option to file appeal before the appellate

authority as per the provisions of the CGST Act. It is further

submitted that the grant of input tax credit under Section 16

of the CGST Act is a concession or relaxation and nobody

can claim it as a matter of vested right. It is entirely for the

legislature to make a provision and restrict the benefit or

concession or relaxation either to a class of persons or even

if it extends to all, it can restrict the term or period or limit

up to which the concession can be availed of. It has also

been submitted by Mr. Mishra that the petitioner has

misinterpreted Sections 16(1) & 16(2) of the CGST Act, as

Section 16(4) lays down due date for claiming ITC which

provides due date to avail ITC based on the date of invoice or

debit note and not based on the return period. Since the

petitioner has contravened the provision laid under Section

16(4), ITC is not available to it. Mr. Mishra would rely upon

3(1986) 4 SCC 447 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

the decision of the Supreme Court in the matter of Kerala

Hotel and Restaurant Association and others v. State of

Kerala and others

4

to buttress his submission. He would

further submit that the State enjoys the widest latitude

where measures of economic regulation are concerned and it

is for the State to decide what economic and social policy it

should pursue. In view of the larger discretion of the

legislature in matter of its preferences of economic and social

policies, it has been held by the Supreme Court that the

legislative preference in favour of a particular class cannot be

questioned on the ground of lack of legislative wisdom or the

method adopted is not the best or that there were better

ways of abusing the competing interests and claims. He

would also submit that Article 19(1) of the Constitution gives

certain freedoms to every citizen. The petitioner being a

proprietorship firm is not a citizen for the purpose of Article

19 of the Constitution and therefore the benefit of Article

19(1)(g) would not be available to the petitioner and even

there is no violation of Section 16(4) of the CGST Act in the

present case, therefore, the writ petition is liable to be

dismissed.

Submission on behalf of Respondents No.3 to 5

8.Mr. Ashutosh Singh Kachhawaha, learned counsel appearing

for respondents No.3 to 5, would submit that the grant of

input tax credit under Section 16 of the CGST Act is a

4(1990) 2 SCC 502 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

concession or relaxation and nobody can claim it as a matter

of vested right. The petitioner has no vested right to claim

ITC except in accordance with Section 16(4) read with

Section 44 of the CGST Act and Rule 61 of the CGST Rules.

In that view of the matter, Mr. Kachhawaha would further

submit that the show cause notice issued to the petitioner is

strictly in accordance with the scheme of the CGST Act and

therefore the writ petition deserves to be dismissed.

Submission on behalf of Amicus Curiae

9.Mr. Neelabh Dubey, learned amicus curiae, would submit

that Section 16 of the CGST Act lays down eligibility and

certain conditions of taking input tax credit. A plain reading

of the Section makes it abundantly clear that Section 16(1) is

an enabling provision and Sections 16(2), (3) & (4) are

restrictive provisions which list out certain mandatory

conditions which are required to be followed to take credit of

input tax credit as provided under Section 16(1). Section

16(4) imposes a condition that ITC cannot be claimed on the

basis of invoice or debit note for supply of goods or services

or both after 30

th

of November, as Section 16(4) imposes a

limitation on availing the credit. He would rely upon the

decision of the Supreme Court in the matter of The Twyford

Tea Co. Ltd. and another v. The State of Kerala and

another

5

to demonstrate that the law in this regard is

absolutely clear regarding immense leeway available with the

51970(1) SCC 189 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

Parliament. He would further rely upon a recent decision of

the Supreme Court in the matter of Union of India and

others v. VKC Footsteps India Private Limited

6

which

deals with refund of unutilised ITC to input goods alone. He

would also submit that ground under Article 19(1)(g) of the

Constitution would not be available to the petitioner, as it is

available only to citizens and not to juristic persons like the

petitioner in the instant case. Finally, the learned amicus

curiae would contend that challenge on ground of Article

300A of the Constitution is also equally not available to the

petitioner against an act of legislature as it can only be

challenged on two counts; being it lacks legislative

competence and that it infringes on Part XIII of the

Constitution of India.

10.We have heard learned counsel for the parties as also the

learned amicus curiae and considered their rival submissions

made herein-above and also went through the records with

utmost circumspection.

11.The question that arises for determination is, whether

Section 16(4) of the CGST Act is violative of Articles 14, 19(1)

(g) & 300A of the Constitution of India, as by Section 16(4)

time limit for claiming ITC has been provided?

6(2022) 2 SCC 603 2023:CGHC:32289-DB

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Principles governing Construction of Taxing Statutes

12.Article 265 of the Constitution provides that no tax shall be

levied or collected except by authority of law. Similarly,

Article 366(28) of the Constitution, which defines Taxation

and Tax, states as under: -

“Taxation includes the imposition of any tax or

impost, whether general or local or special, and

‘tax’ shall be construed accordingly.”

13.Justice G.P. Singh in Principles of Statutory

Interpretation, 15

th

Edition, in Chapter 10 at page 616 laid

down the general principles for construction of taxing statute

that a taxing statute is to be construed strictly, and held as

under: -

“10.1.2 General Principles of Strict

Construction

A taxing statute is to be strictly construed. The

well-established rule in the familiar words of Lord

Wensleydale, reaffirmed by Lord Halsbury and Lord

Simonds, means:

The subject is not to be taxed without clear

words for that purpose; and also that every Act

of Parliament must be read according to the

natural construction of its words.

7

In a classic passage Lord Cairns stated the

principle thus:

If the person sought to be taxed comes within

the letter of the law he must be taxed, however

great the hardship may appear to the judicial

mind to be. On the other hand, if the Crown

seeking to recover the tax, cannot bring the

subject within the letter of the law, the subject

7Re, Micklethwait, (1885) 11 Ex 452, p. 456 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

is free, however apparently within the spirit of

law the case might otherwise appear to be. In

other words, if there be admissible in any

statute, what is called an equitable,

construction, certainly, such a construction is

not admissible in a taxing statute where you

can simply adhere to the words of the statute.

8

Viscount Simon quote with approval a passage

from Rowlatt J expressing the principle in the

following words:

In a taxing Act one has to look merely at what

is clearly said. There is no room for any

intendment. There is no equity about a tax.

There is no presumption as to tax. Nothing is to

be read in, nothing is to be implied. One can

only look fairly at the language used.

9

Relying upon this passage Lord Upjohn said:

Fiscal measures are not built upon any theory

of taxation.

10

”

14.It has been further held as under in Principles of Statutory

Interpretation at page 619: -

“The Supreme Court has enunciated in similar

words the principle of interpretation of taxing laws.

Bhagwati J stated the principle as follows:

“In construing fiscal statutes and in

determining the liability of a subject to tax one

must have regard to the strict letter of the law.

If the revenue satisfies the court that the case

falls strictly within the provisions of the law,

the subject can be taxed. If, on the other

hand, the case is not covered within the four

corners of the provisions of the taxing statute,

no tax can be imposed by inference or by

analogy or by trying to probe into the

intentions of the Legislature and by

8Partington v AG, (1869) LR 4 HL 100 p 122 : 21 LT 370

9Cape Brandy Syndicate v IRC, (1921) 1 KB 64, p 71 (Rowlatt, J)

10Commr of Customs v Top Ten Promotions, (1969) 3 All ER 39, p 90 (HL) 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

considering what was the substance of the

matter.

11

”

Shah J, has formulated the principle thus:

“In interpreting a taxing statute,

equitable considerations are entirely out of

place. Nor can taxing statutes be interpreted

on any presumptions or assumptions. The

court must look squarely at the words of the

statute and interpret them. It must interpret a

taxing statute in the light of what is clearly

expressed; it cannot imply anything which is

not expressed; it cannot import provisions in

the statute so as to supply any assumed

deficiency.

12

”

And K. Iyer, J, observed:

“Taxation consideration may stem from

administrative experience and other factors of

life and not artistic visualisation or neat logic

and so the literal, though pedestrian

interpretation must prevail.

13

”

Before taxing any person it must be shown that he

falls within the ambit of the charging section by

clear words used in the section.

14

15.The Constitution Bench of the Supreme Court in the matter

of R.K. Garg v. Union of India

15

, has enumerated

established principles for interpreting law dealing with

economic activities and held in paragraph 8 as under: -

“8.Another rule of equal importance is that laws

relating to economic activities should be viewed

with greater latitude than laws touching civil rights

such as freedom of speech, religion, etc. It has

been said by no less a person than Holmes, J., that

11AV Fernandez v State of Kerala, AIR 1957 SC 657, p 661

12Sales Tax Commr v Modi Sugar Mills, AIR 1961 SC 1047, p 1051

13Martand Dairy and Farm v UOI, AIR 1975 SC 1492, p 1494

14Commr of Wealth Tax, Gujarat v Ellis Bridge Gymkhana, AIR 1998 SC

120, pp 125, 126 : (1998) 1 SCC 384

15(1981) 4 SCC 675 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

the legislature should be allowed some play in the

joints, because it has to deal with complex

problems which do not admit of solution through

any doctrinaire or straitjacket formula and this is

particularly true in case of legislation dealing with

economic matters, where, having regard to the

nature of the problems required to be dealt with,

greater play in the joints has to be allowed to the

legislature. The court should feel more inclined to

give judicial deference to legislature judgment in

the field of economic regulation than in other areas

where fundamental human rights are involved.

Nowhere has this admonition been more felicitously

expressed than in Morey v. Doud

16

where

Frankfurter, J., said in his inimitable style:

“In the utilities, tax and economic regulation

cases, there are good reasons for judicial self-

restraint if not judicial deference to legislative

judgment. The legislature after all has the

affirmative responsibility. The courts have only

the power to destroy, not to reconstruct. When

these are added to the complexity of economic

regulation, the uncertainty, the liability to error,

the bewildering conflict of the experts, and the

number of times the judges have been overruled

by events – self-limitation can be seen to be the

path to judicial wisdom and institutional

prestige and stability.””

16.Similarly, in the matter of Kailash Chandra v. Mukundi

Lal

17

, the Supreme Court has held that a provision in the

statute is not to be read in isolation, it has to be read with

other related provisions in the Act itself and observed in

paragraph 11 as under: -

“11.A provision in the statute is not to be read in

isolation. It has to be read with other related

provisions in the Act itself, more particularly, when

the subject-matter dealt with in different sections

161957 SCC OnLine US SC 105

17(2002) 2 SCC 678 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

or parts of the same statute is the same or similar

in nature.”

17.Similarly, in The Twyford Tea Co. Ltd. (supra), the

Supreme Court has held that in taxation even more than in

other fields, Legislatures possess the greatest freedom in

classification. The burden is on the one attacking the

legislative arrangement to negative every conceivable basis

which might support it. The Supreme Court has further

held that if a State can validly pick and choose one

commodity for taxation and that is not open to attack under

Article 14, the same result must follow when the State picks

out one category of goods and subjects it to taxation.

18.In the matter of State of M.P. v. Rakesh Kohli

18

, the

Supreme Court while dealing with constitutional validity of a

taxation law enacted by Parliament or State Legislature has

laid down the principles in paragraph 32 of its report as

under: -

“32.While dealing with constitutional validity of a

taxation law enacted by Parliament or State

Legislature, the court must have regard to the

following principles: (i), there is always

presumption in favour of constitutionality of a law

made by Parliament or a State Legislature (ii), no

enactment can be struck down by just saying that

it is arbitrary or unreasonable or irrational but

some constitutional infirmity has to be found (iii),

the court is not concerned with the wisdom or

unwisdom, the justice or injustice of the law as the

Parliament and State Legislatures are supposed to

be alive to the needs of the people whom they

represent and they are the best judge of the

18(2012) 6 SCC 312 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

community by whose suffrage they come into

existence (iv), hardship is not relevant in

pronouncing on the constitutional validity of a

fiscal statute or economic law and (v), in the field of

taxation, the Legislature enjoys greater latitude for

classification.”

19.From the principles laid down by their Lordships of the

Supreme Court in the aforesaid cases, it is quite vivid that

that the power of the legislature especially in fiscal statute is

very wide and can only be challenged on two counts being it

lacks legislative competence and that it infringes or takes

away any of the fundamental rights or any of the

constitutional provisions. However, in the instant case, the

petitioner has challenged the constitutional validity of

Section 16(4) of the CGST Act on the ground that it is

violative of Articles 14, 19(1)(g) & 300A of the Constitution.

20.At this stage, it would be appropriate to notice Section 16 of

the CGST Act which states as under: -

“16. Eligibility and conditions for taking input

tax credit.—(1) Every registered person shall,

subject to such conditions and restrictions as may

be prescribed and in the manner specified in

section 49, be entitled to take credit of input tax

charged on any supply of goods or services or both

to him which are used or intended to be used in the

course or furtherance of his business and the said

amount shall be credited to the electronic credit

ledger of such person.

(2) 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,— 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

(a) he is in possession of a tax invoice or debit

note issued by a supplier registered under this

Act, or such other tax paying documents as may

be prescribed;

(aa) the details of the invoice or debit note

referred to in clause (a) has been furnished by

the supplier in the statement of outward

supplies and such details have been

communicated to the recipient of such invoice

or debit note in the manner specified under

section 37;

(b) he has received the goods or services or both.

Explanation.—For the purposes of this

clause, it shall be deemed that the registered

person has received the goods or, as the case

may be, services—

(i) where the goods are delivered by the

supplier to a recipient or any other person on

the direction of such registered person,

whether acting as an agent or otherwise,

before or during movement of goods, either by

way of transfer of documents of title to goods

or otherwise;

(ii) where the services are provided by the

supplier to any person on the direction of and

on account of such registered person.

(ba) the details of input tax credit in respect of

the said supply communicated to such

registered person under section 38 has not been

restricted;

(c) subject to the provisions of section 41, the

tax charged in respect of such supply has been

actually paid to the Government, either in cash

or through utilisation of input tax credit

admissible in respect of the said supply; and

(d) he has furnished the return under section

39: 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

Provided that where the goods against an

invoice are received in lots or instalments, the

registered person shall be entitled to take credit

upon receipt of the last lot or instalment:

Provided further that where a recipient fails

to pay to the supplier of goods or services or

both, other than the supplies on which tax is

payable on reverse charge basis, the amount

towards the value of supply along with tax

payable thereon within a period of one hundred

and eighty days from the date of issue of invoice

by the supplier, an amount equal to the input

tax credit availed by the recipient shall be paid

by him along with interest payable under

section 50, in such manner as may be

prescribed:

Provided also that the recipient shall be

entitled to avail of the credit of input tax on

payment made by him to the supplier of the

amount towards the value of supply of goods or

services or both along with tax payable thereon.

(3) Where the registered person has claimed

depreciation on the tax component of the cost of

capital goods and plant and machinery under the

provisions of the Income-tax Act, 1961 (43 of 1961),

the input tax credit on the said tax component

shall not be allowed.

(4) A registered person shall not be entitled to

take input tax credit in respect of any invoice or

debit note for supply of goods or services or both

after the thirtieth day of November following the

end of financial year to which such invoice or debit

note pertains or furnishing of the relevant annual

return, whichever is earlier:

Provided that the registered person shall be

entitled to take input tax credit after the due date

of furnishing of the return under section 39 for the

month of September, 2018 till the due date of

furnishing of the return under the said section for

the month of March, 2019 in respect of any invoice

or invoice relating to such debit note for supply of 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

goods or services or both made during the financial

year 2017-18, the details of which have been

uploaded by the supplier under sub-section (1) of

section 37 till the due date for furnishing the

details under sub-section (1) of said section for the

month of March, 2019.

21.Sub-section (62) of Section 2 of the CGST Act defines “input

tax”, which states as under: -

“(62)“input tax” in relation to a registered person,

means the central tax, State tax, integrated tax or

Union territory tax charged on any supply of goods

or services or both made to him and includes—

(a) the integrated goods and services tax

charged on import of goods;

(b) the tax payable under the provisions of sub-

sections (3) and (4) of section 9;

(c) the tax payable under the provisions of sub-

sections (3) and (4) of section 5 of the Integrated

Goods and Services Tax Act;

(d) the tax payable under the provisions of sub-

sections (3) and (4) of section 9 of the respective

State Goods and Services Tax Act; or

(e) the tax payable under the provisions of sub-

sections (3) and (4) of section 7 of the Union

Territory Goods and Services Tax Act,

but does not include the tax paid under the

composition levy;”

22.Sub-section (63) of Section 2 of the CGST Act defines, “input

tax credit” means the credit of input tax. Input Tax Credit is

provided under Chapter V of the CGST Act. Section 16,

which is under Chapter V, provides for eligibility and

conditions for taking input tax credit. 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

23.A careful perusal of Section 16(1) of the CGST Act would

show that it provides for input tax credit to every registered

person on any supply of goods or services or both to him

which are used or intended to be used in the course or

furtherance of his business and the said amount shall be

credited to the electronic credit ledger of such person subject

to two conditions; (a) such conditions and restrictions as

may be prescribed and (b) in the manner specified in Section

49. Sub-section (2) of Section 16 is a non obstante clause

and states that 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 the conditions mentioned in

clauses (a) to (d) are fulfilled. Sub-section (3) of Section 16

contemplates when the input tax credit on the tax

component cannot be allowed i.e. where the registered

person has claimed depreciation on the tax component of the

cost of capital goods and plant and machinery under the

provisions of the Income-tax Act, 1961. Sub-section (4) of

Section 16, which has been called in question by the

petitioner herein, clearly states that a registered person shall

not be entitled to take input tax credit as defined under

Section 2(63) after the due date of furnishing of the return

under Section 39 for the month of September following the

end of financial year to which such invoice or invoice relating

to such debit note pertains or furnishing of the relevant

annual return, whichever is earlier. As such, the grant of 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

ITC has been made subject to conditions and restrictions put

thereunder. Thus, the registered person is entitled for ITC in

respect of any invoice or debit note for supply of goods if the

requisite conditions stipulated therein are fulfilled. The right

of a registered person to take ITC under sub-section (1) of

Section 16 would become the vested right only if the

conditions to take it are fulfilled.

Nature of Input Tax Credit: -

24.The Input Tax Credit is a nature of benefit or concession

extended to the dealer under the statutory scheme. The

concession can be received by the beneficiary only as per the

scheme of the statute.

25.In the matter of Godrej & Boyce Mf g . Co. Pvt. Ltd. a nd

others v. Commissioner of Sales Tax and others

19

, their

Lordships of the Supreme Court dealing with Rules 41 & 41-

A of the Bombay Sales Tax Rules, 1959 held that the rule-

making authority can provide for a small abridgement or

curtailment while extending a concession, and observed as

under: -

“9.Sri Bobde appearing for the appellants

reiterated the contentions urged before the High

Court. He submitted that the deduction of one per

cent, in effect, amounts to taxing the raw material

purchased outside the State or to taxing the sale of

finished goods effected outside the State of

Maharashtra. We cannot agree. Indeed, the whole

issue can be put in simpler terms. The appellant

(manufacturing dealer) purchases his raw material

19(1992) 3 SCC 624 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

both within the State of Maharashtra and outside

the State. Insofar as the purchases made outside

the State of Maharashtra are concerned, the tax

thereon is paid to other States. The State of

Maharashtra gets the tax only in respect of

purchases made by the appellant within the State.

So far as the sales tax leviable on the sale of the

goods manufactured by the appellant is concerned,

the State of Maharashtra can levy and collect such

tax only in respect of sales effected within the State

of Maharashtra. It cannot levy or collect tax in

respect of goods which are despatched by the

appellant to his branches and agents outside the

State of Maharashtra and sold there. In law (apart

from Rules 41 and 41-A) the appellant has no legal

right to claim set-off of the purchase tax paid by

him on his purchases within the State from out of

the sales tax payable by him on the sale of the

goods manufactured by him. It is only by virtue of

the said Rules – which, as stated above, are

conceived mainly in the interest of public – that he

is entitled to such set-off. It is really a concession

and an indulgence. More particularly, where the

manufactured goods are not sold within the State

of Maharashtra but are despatched to out – State

branches and agents and sold there, no sales tax

can be or is levied by the State of Maharashtra.

The State of Maharashtra gets nothing in respect of

such sales effected outside the State. In respect of

such sales, the rule-making authority could well

have denied the benefit of set-off. But it chose to

be generous and has extended the said benefit to

such out-State sales as well, subject, however to

deduction of one per cent of the sale price of such

goods sent out of the State and sold there. We fail

to understand how a valid grievance can be made

in respect of such deduction when the very

extension of the benefit of set-off is itself a boon or

a concession. It was open to the rule-making

authority to provide for a small abridgement or

curtailment while extending a concession. Viewed

from this angle, the argument that providing for

such deduction amounts to levy of tax either on

purchases of raw material effected outside the

State or on sale of manufactured goods effected 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

outside the State of Maharashtra appears to be

beside the point and is unacceptable. So is the

argument about apportioning the sale-price with

reference to the proportion in which raw material

was purchased within and outside the State.”

26.Similarly, in the matter of India Agencies (Regd.),

Bangalore v. Additional Commissioner of Commercial

Taxes, Bangalore

20

, the Supreme Court while dealing with

Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules,

1957, which requires a provision for furnishing original Form

C to claim concessional rate of tax under Section 8(1) of the

Central Sales Tax Act, 1956, held that the said requirement

under the rule is mandatory and without producing specific

documents, dealer cannot claim the benefits, and their

Lordships observed as under: -

“13.Under the Central Sales Tax (Karnataka)

Rules, 1957, the dealer is required to submit along

with his return the original of the prescribed forms.

As could be seen from the rule extracted above, a

registered dealer who claims that he has made a

sale to another registered dealer is required to

attach the original of the declaration forms on the

certificate in the prescribed form received by him

from the prescribed dealer along with his return

filed by him. We have already extracted Section 13

of the Central Sales Tax Act, which deals with the

power of the Central Government to make rules,

the form and the manner for furnishing declaration

under sub-section (8) of Section 8. Sub-section (3)

of Section 13 provides that the State Government

may make rules not inconsistent with the

provisions of the Central Sales Tax Act, 1956 and

the rules made under sub-section (1) to carry out

the purposes of the Act. In exercise of the powers

conferred by sub-sections (3), (4) and (5) of Section

20(2005) 2 SCC 129 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

13 of the Central Sales Tax, 1956, the Government

of Karnataka made the Central Sales Tax

(Karnataka) Rules, 1957. Under Rule 6(b)(ii) of the

Karnataka Rules, the State Government has

prescribed the procedures to be followed and the

documents to be produced for claiming

concessional rate of tax under Section 8(4) of the

Central Sales Tax Act. Thus, the dealer has to

strictly follow the procedure and Rule 6(b)(ii) and

produce the relevant materials required under the

said rule. Without producing the specified

documents as prescribed thereunder a dealer

cannot claim the benefits provided under Section 8

of the Act. Therefore, we are of the opinion that the

requirements contained in Rule 6 (b)(ii) of the

Central Sales Tax (Karnataka) Rules, 1957 are

mandatory. Sections 12(1), (2) and (3) of the

Central Sales Tax (R&T) Rules, 1957 provide that

the registered dealer is required to file the

declaration and the certificate referred to in Section

8(4) in Form C and D respectively. Form C is a

declaration divided into three parts. All the three

parts are identical, the first part of the form being

the counter foil and the second part being the

duplicate and the third part being the original. The

counter foil is to be retained by the purchasing

dealer. The original is to be filed before the

Assessing Officer by the selling dealer to claim the

concessional rate. The duplicate is to be retained

by the selling dealer. If the C Form or the original

part of it is lost whilst in the custody of the

purchasing dealer or in transit, the purchasing

dealer shall have to furnish an indemnity bond for

the same as fixed by the authority concerned. If

the original part of C Form is lost by the selling

dealer whilst it is in his custody or in transit, the

selling dealer shall furnish an indemnity bond as

fixed by the authority concerned and follow the

procedure prescribed under Rule 12(3).”

27.Similarly, in the matter of State of Karnataka v. M.K. Agro

Tech. Private Limited

21

, the Supreme Court has held that

21(2017) 16 SCC 210 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

taxing statutes are to be interpreted literally and further it is

the domain of the legislature as to how the tax credit is to be

given and under what circumstances, and pertinently

observed as under: -

“32.Fourthly, the entire scheme of the KVAT Act is

to be kept in mind and Section 17 is to be applied

in that context. Sunflower oil cake is subject to

input tax. The legislature, however, has

incorporated the provision, in the form of Section

10, to give tax credit in respect of such goods which

are used as inputs/raw material for manufacturing

other goods. Rationale behind the same is simple.

When the finished product, after manufacture, is

sold, VAT would be again payable thereon. This

VAT is payable on the price at which such goods

are sold, costing whereof is done keeping in view

the expenses involved in the manufacture of such

goods plus the profits which the manufacturer

intends to earn. Insofar as costing is concerned,

element of expenses incurred on raw material

would be included. In this manner, when the final

product is sold and the VAT paid, component of

raw material would be included again. Keeping in

view this objective, the legislature has intended to

give tax credit to some extent. However, how much

tax credit is to be given and under what

circumstances, is the domain of the legislature and

the courts are not to tinker with the same.”

28.In the matter of Jayam & Co. v. Commr.

22

, while

interpreting the provisions of Sections 19(20), 3(2) & 3(3) of

the Tamil Nadu Value Added Tax Act, 2006, it has been held

by the Supreme Court that ITC is a form of concession

provided by the legislature, it is not admissible to all kinds of

sales and certain specified sales are specifically excluded;

22(2016) 15 SCC 125 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

and concession of ITC is available on certain conditions, and

observed as under: -

“11.From the aforesaid scheme of Section 19 the

following significant aspects emerge:

(a) ITC is a form of concession provided by the

legislature. It is not admissible to all kinds of

sales and certain specified sales are specifically

excluded.

(b) Concession of ITC is available on certain

conditions mentioned in this section.

(c) One of the most important condition is that

in order to enable the dealer to claim ITC it has

to produce original tax invoice, completed in all

respect, evidencing the amount of input tax.”

Their Lordships further held that it is a trite law that

whenever concession is given by a statute the conditions

thereof are to be strictly complied with in order to avail such

concession, and observed in paragraph 12 as under: -

“12.It is trite law that whenever concession is

given by statute or notification, etc. the conditions

thereof are to be strictly complied with in order to

avail such concession. Thus, it is not the right of

the “dealers” to get the benefit of ITC but it is a

concession granted by virtue of Section 19. As a

fortiori, conditions specified in Section 10 must be

fulfilled. In that hue, we find that Section 10

makes original tax invoice relevant for the purpose

of claiming tax. Therefore, under the scheme of the

VAT Act, it is not permissible for the dealers to

argue that the price as indicated in the tax invoice

should not have been taken into consideration but

the net purchase price after discount is to be the

basis. If we were dealing with any other aspect

dehors the issue of ITC as per Section 19 of the

VAT Act, possibly the arguments of Mr Bagaria

would have assumed some relevance. But, keeping 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

in view the scope of the issue, such a plea is not

admissible having regard to the plain language of

sections of the VAT Act, read along with other

provisions of the said Act as referred to above.”

29.Furthermore, recently, in the matter of ALD Automotive

Private Limited v. Commercial Tax Officer now upgraded

as Assistant Commissioner (CT) and others

23

, considering

the earlier decisions, their Lordships of the Supreme Court

held that input tax credit is admissible only as per the

conditions of the T.N. Value Added Tax Act, 2006, and

observed in paragraph 43 as under: -

“43.Section 19(11) thus allowed an extended

period for input credit which if not claimed in any

month can be claimed before the end of the

financial year or before the 90 days from the date of

purchase whichever is later. The provision of

Section 19(11) is thus an additional benefit given to

dealer for claiming input credit in extended period.

The use of the word “shall make the claim” needs

no other interpretation.”

30.In VKC Footsteps India Private Limited’s case (supra),

similar issue was considered with respect to refund of

additional ITC as that rule limited the refund of unutilised

ITC to input goods alone upholding the aforesaid rule. Their

Lordships observed in paragraphs 88 & 90 as under: -

“88.The jurisprudential basis furnishes a

depiction of an ideal state of existence of GST

legislation within the purview of a modern

economy, as a destination-based tax. But there

can be no gain saying the fact that fiscal legislation

around the world, India being no exception, makes

complex balances founded upon socio-economic

23(2019) 13 SCC 225 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

complexities and diversities which permeate each

society. The form which a GST legislation in a

unitary State may take will vary considerably from

its avatar in a nation such as India where a dual

system of GST law operates within the context of a

federal structure. The ideal of a GST framework

which Article 279-A(6) embodies has to be

progressively realised. The doctrines which have

been emphasized by the counsel during the course

of the arguments furnish the underlying rationale

for the enactment of the law but cannot furnish

either a valid basis for judicial review of the

legislation or make out a ground for invalidating a

validly enacted law unless it infringes

constitutional parameters. While adopting the

constitutional framework of a GST regime,

Parliament in the exercise of its constituent power

has had to make and draw balances to

accommodate the interests of the States. Taxes on

alcohol for human consumption and stamp duties

provide a significant part of the revenues of the

States. Complex balances have had to be drawn so

as to accommodate the concerns of the States

before bringing them within the umbrella of GST.

These aspects must be borne in mind while

assessing the jurisprudential vision and the

economic rationale for GST legislation. But

abstract doctrine cannot be a ground for the Court

to undertake the task of redrawing the text or

context of a statutory provision. This is clearly an

area of law where judicial interpretation cannot be

ahead of policy making. Fiscal policy ought not be

dictated through the judgments of the High Courts

or this Court. For it is not the function of the

Court in the fiscal arena to compel Parliament to go

further and to do more by, for instance, expanding

the coverage of the legislation (to liquor, stamp

duty and petroleum) or to bring in uniformity of

rates. This would constitute an impermissible

judicial encroachment on legislative power.

Likewise, when the first proviso to Section 54(3)

has provided for a restriction on the entitlement to

refund it would be impermissible for the Court to

redraw the boundaries or to expand the provision

for refund beyond what the legislature has 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

provided. If the legislature has intended that the

equivalence between goods and services should be

progressively realised and that for the purpose of

determining whether refund should be provided, a

restriction of the kind which has been imposed in

clause (ii) of the proviso should be enacted, it lies

within the realm of policy.

90.GST legislation in India is the product of hard

constitutional and legislative work which stretched

over several decades. Our fiscal regime is yet to

arrive at an ideological position of one bundle for

goods and services based on a single rate structure.

Broadly speaking, goods and services are taxed at

5%, 12%, 18% and 40%. As on date, there is an

absence of uniformity in rates and it is the

multiplicity of rates which has given rise to an

inverted duty structure. Registered persons with

unutilised ITC may conceivably form one class but

it is not possible to ignore that this class consists of

species of different hues. Given these intrinsic

complexities, the legislature has to draw the

balance when it decides upon granting a refund of

accumulated ITC which has remained unutili sed.

In doing so, Parliament while enacting sub-section

(3) of Section 54 has stipulated that no refund of

unutilised ITC shall be allowed other than in the

two specific situations envisaged in clauses (i) and

(ii) of the first proviso. Whereas clause (i) has dealt

with zero-rated supplies made without the payment

of tax, clause (ii), which governs domestic supplies,

has envisaged a more restricted ambit where the

credit has accumulated on account of the rate of

tax on inputs being higher than the rate of tax on

output supplies. While the CGST Act defines the

expression “input” in Section 2(59) by bracketing it

with goods other than capital goods, it is true that

the plural expression “inputs” has not been

specifically defined. But there is no reason why the

ordinary principle of construing the plural in the

same plane as the singular should not be applied.

To construe “inputs” so as to include both input

goods and input services would do violence to the

provisions of Section 54(3) and would run contrary

to the terms of Explanation I which have been 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

noted earlier. Consequently, it is not open to the

Court to accept the argument of the assessee that

in the process of construing Section 54(3)

contextually, the Court should broaden the

expression “inputs” to cover both goods and

services.”

31.As such, ITC is a nature of benefit or concession extended to

the dealer and it can be availed by the beneficiary as per the

scheme of the statute subject to fulfillment of the conditions

laid down in Section 16(4) of the CGST Act. In that view of

the matter, Section 16(4) cannot be held to be violative of

Article 14 of the Constitution.

32.Now, the next question for consideration is, whether the

petitioner, which is a proprietorship firm, can claim

protection of Article 19(1)(g) of the Constitution?

33.Article 19(1)(g) of the Constitution states as under: -

“19. Protection of certain rights regarding

freedom of speech, etc.—(1) All citizens shall have

the right—

(a) to (e) xxxxxxxxx

(g) to practise any profession, or to carry on

any occupation, trade or business.”

34.A careful perusal of the scheme of Article 19 of the

Constitution would show that a group of rights are listed as

clauses (a) to (g) and are recognized as fundamental rights

conferred on citizens. Similarly, the petitioner, which is a

proprietorship firm, has filed this writ petition under Article

226 / 227 of the Constitution of India, it has not been filed

by any citizen in individual capacity, rather it has been filed 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

by a proprietorship firm namely, M/s Jain Brothers through

its Proprietor Mr. Amit Jain.

35.The Supreme Court in the matter of Indian Social Action

Forum (INSAF) v. Union of India

24

has categorically held

that a Company being a juristic person cannot be a citizen

for the purpose of Article 19 of the Constitution. It has been

observed by their Lordships as under: -

“18.We find force in the objection taken on behalf

of the Union of India that the appellant

organisation is not entitled to invoke Article 19. No

member of the appellant organisation is arrayed as

a party. Article 19 guarantees certain rights to “all

citizens”. The appellant, being an organisation,

cannot be a citizen for the purpose of Article 19 of

the Constitution. (See State Trading Corpn. of India

Ltd. v. CTO

25

; Bennett Coleman & Co. v. Union of

India

26

; TELCO Ltd. v. State of Bihar

27

and Shree

Sidhbali Steels Ltd. v. State of U.P.

28

). In the

absence of any member of the association as a

petitioner in the writ petition, the appellant

organisation cannot enforce the rights guaranteed

under Article 19 of the Constitution.”

36.In Shree Sidhbali Steels Limited (supra), their Lordships of

the Supreme Court have held that a Company not being a

citizen has no fundamental right under Article 19 of the

Constitution of India, and observed as under: -

“25.A company not being a citizen has no

fundamental right under Article 19. … It is well

settled that a company cannot maintain a petition

under Article 32 of the Constitution for

enforcement of fundamental rights guaranteed

24(2021) 15 SCC 60

25(1964) 4 SCR 99 : AIR 1963 SC 1811

26(1972) 2 SCC 788

27(1964) 6 SCR 885 : AIR 1965 SC 40

28(2011) 3 SCC 193 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

under Article 19 of the Constitution. A company,

being not a citizen, has no fundamental rights

under Article 19 of the Constitution. Nonetheless,

the companies would be entitled to claim right

under Article 14 of the Constitution and, therefore,

it would be relevant to examine whether the

respondents have committed breach of Article 14

by withdrawing the concession in electricity rates

given/granted earlier.”

37.Similarly, in Bennett Coleman & Co. (supra) also, the

Supreme Court has held that a company does not have a

fundamental right under Article 19 of the Constitution since

it is not a citizen. It has been observed by their Lordships as

under: -

“11.This Court in State Trading Corporation of

India Ltd. v. The Commercial Tax Officer,

Visakhapatnam,

25

and Tata Engineering and

Locomotive Co. v. State of Bihar,

27

expressed the

view that a corporation was not a citizen within the

meaning of Article 19, and, therefore, could not

invoke that Article. The majority held that

nationality and citizenship were distinct and

separate concepts. The view of this Court was that

the word "citizen" in Part II and in Article 19 of the

Constitution meant the same thing. The result was

that an incorporated company could not be a

citizen so as to invoke fundamental rights. In the

State Trading Corporation case (supra) the Court

was not invited to "tear the corporate veil". In the

Tata Engineering and Locomotive Co. case (supra)

this Court said that a company was distinct and

separate entity from shareholders. …”

38.Thus, in view of the provision contained in Article 19(1)(g) of

the Constitution and the principles of law laid down by their

Lordships of the Supreme Court, it would appear that

protection under Article 19(1)(g) of the Constitution is 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

available to a citizen and in order to claim protection under

Article 19(1)(g), the person coming to the court must be a

citizen, however, in the instant case, proprietorship firm has

filed writ petition claiming protection of Article 19(1)(g).

39.The distinction between partnership firm and a proprietary

concern has been considered by the Supreme Court stating

the law in following terms in the matter of Ashok Transport

Agency v. Awadhesh Kumar

29

in which it has been held

that a proprietary concern is only the business name in

which the proprietor of the business carries on the business,

and it has been observed as under: -

“6.A partnership firm differs from a proprietary

concern owned by an individual. A partnership is

governed by the provisions of the Partnership Act,

1932. Though a partnership is not a juristic

person but Order 30 Rule 1 CPC enables the

partners of a partnership firm to sue or to be sued

in the name of the firm. A proprietary concern is

only the business name in which the proprietor of

the business carries on the business. A suit by or

against a proprietary concern is by or against the

proprietor of the business. In the event of the

death of the proprietor of a proprietary concern, it

is the legal representatives of the proprietor who

alone can sue or be sued in respect of the dealings

of the proprietary business. The provisions of Rule

10 of Order 30 which make applicable the

provisions of Order 30 to a proprietary concern,

enable the proprietor of a proprietary business to

be sued in the business names of his proprietary

concern. The real party who is being sued is the

proprietor of the said business. The said provision

does not have the effect of converting the

proprietary business into a partnership firm. The

provisions of Rule 4 of Order 30 have no

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(W.P.(T)No.191/2022)

application to such a suit as by virtue of Order 30

Rule 10 the other provisions of Order 30 are

applicable to a suit against the proprietor of

proprietary business ‘insofar as the nature of such

case permits’. This means that only those

provisions of Order 30 can be made applicable to

proprietary concern which can be so made

applicable keeping in view the nature of the case.”

40.As such, in view of the aforesaid legal provision flowing from

Article 19(1)(g) of the Constitution and the principles of law

laid down by their Lordships of the Supreme Court, the

petitioner herein, which has filed the present writ petition, is

only a proprietorship firm and not a citizen and therefore

cannot claim protection of Article 19(1)(g). It is held

accordingly and this ground claiming protection of Article

19(1)(g) is not available to the petitioner, which is a

proprietorship firm.

41.The next ground that has been raised on behalf of the

petitioner that Section 16(4) of the CGST Act is violative of

Article 300A of the Constitution of India, is also not at all

made out, as Article 300A is ‘right to property’ which is the

constitutional right and clearly provides that it cannot be

taken away except in accordance with law.

42.The decision of the Supreme Court and that of the Calcutta

High Court and the Gujarat High Court in Chandavarkar

Sita Ratna Rao (supra), Howrah Tax Payers’ Association

(supra) and M/s Siddharth Enterprises (supra), 2023:CGHC:32289-DB

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(W.P.(T)No.191/2022)

respectively, relied upon by the petitioner, are clearly

distinguishable to the facts of the present case.

Conclusion

43.In view of the aforesaid discussion, in conclusion, we are of

the considered opinion that the provision contained in

Section 16(4) of the CGST Act is violative of neither Article 14

of the Constitution nor Articles 19(1)(g) & 300A of the

Constitution, however, the ground under Article 19(1)(g) is

not available to the petitioner, as the petitioner, in the

instant case, is not a citizen and therefore Article 19(1)(g) is

not available to the petitioner herein. Concludingly, the

petitioner has failed to make out a case to question the

constitutional validity of Section 16(4) of the CGST Act as it

is a constitutionally valid piece of legislation. We hereby

decline to entertain the writ petition. However, the petitioner

is free to pursue the show cause notice issued to him on 20-

5-2022. We have not commented upon the correctness of

the said notice and the competent authority would consider

the objection of the petitioner, if filed in accordance with law,

expeditiously.

44.With the aforesaid observation and direction, the writ

petition stands dismissed leaving the parties to bear their

own cost(s).

Sd/- Sd/-

(Sanjay K. Agrawal) (Radhakishan Agrawal)

Judge Judge

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