2. Simplified Explanation of the Judgment
In this batch of writ petitions, several registered GST dealers approached the Patna High Court challenging the constitutional validity of Section 16(4) of the CGST Act and the BGST Act, 2017. Their main grievance was that Input Tax Credit (ITC) was being denied solely because their GSTR-3B returns were filed after the cut-off date, even though the underlying purchases were genuine and tax had been paid on inputs.
To understand the dispute, the Court treated one petition as the representative case. In that matter, the dealer claimed that monthly outward supply returns (GSTR-1) had been filed for the relevant year. However, the GSTR-3B returns for February 2019 and March 2019 were filed much later (in October and November 2019). The tax authorities issued a show-cause notice under Section 73 of the BGST Act proposing to disallow ITC for those months because of late filing of the GSTR-3B return. The notice quantified tax, interest, and penalty, and the total demand was computed at about ₹1.34 crore.
After the dealer replied, the proper officer passed an order under Section 73 holding the dealer liable, primarily because ITC had been availed in breach of Section 16(4). The dealer’s appeal was also dismissed, again relying on Section 16(4) as the bar to claim ITC after the statutory timeline.
Before the High Court, the petitioners argued that Section 16(4) is confiscatory and operates harshly. They claimed ITC is a vested right protected under Article 300A (right to property) and therefore cannot be taken away merely for delay in filing returns. Alternatively, they argued the provision should be read down, meaning the Court should interpret it in a narrower way so that it does not deny ITC where invoices were already received within the year but the return was filed late. They also argued that the conditions under Section 16(4) were merely procedural and should not override the substantive right created under Section 16(1) and 16(2).
The petitioners raised further connected prayers, including an argument that GSTR-3B should not be treated as a return under Section 39(1), and therefore the statutory cut-off linked to Section 39 should not be used to deny credit. They also challenged the retrospective amendment to Rule 61(5) treating GSTR-3B as a return under Section 39(1).
The Union and the State opposed the challenge. The State argued that ITC under GST is a special and structured concept, governed by Chapter V (Sections 16 to 21), and the legislature has deliberately imposed conditions including a time limit to ensure discipline in filing returns and finality in tax administration. They asserted that ITC is not an unconditional right, but a benefit/concession available only when statutory conditions are strictly satisfied. They also explained that ITC remains in the electronic credit ledger and reaches the treasury mechanism through return filing, which is why delayed claims can disrupt the system and audit finality.
The High Court agreed with the government. It held that Section 16, read as a whole, clearly makes ITC entitlement “subject to conditions and restrictions.” The Court found no ambiguity in the language of Section 16(4), which plainly states that a registered person shall not be entitled to take ITC after the specified date (earlier linked to September following the financial year; later amended to 30 November).
On the constitutional challenge, the Court reasoned that a “vested right” in ITC arises only when the dealer fulfills the prescribed conditions. Since Section 16(4) itself is one of the conditions for entitlement, a dealer who does not meet that condition cannot claim that a vested property right has been taken away under Article 300A. The Court referred to general principles on “property” under Article 300A, but ultimately held that Section 16(4) does not violate Article 300A.
The Court also rejected arguments under Article 14 and Article 19(1)(g). It held that a fiscal provision of uniform application to all registered persons cannot be struck down merely because it fixes a cut-off date. The Court declined to read down the provision, noting the strong presumption of constitutionality and the absence of any real ambiguity requiring judicial re-interpretation.
Finally, relying on Supreme Court precedent that ITC is in the nature of a concession and must be claimed strictly as per the scheme, the High Court upheld the validity of Section 16(4) and dismissed all writ petitions, without costs.
3. Significance or Implication of the Judgment (For general public or government)
- Strict compliance message to businesses: The judgment strongly reinforces that late filing of GSTR-3B can permanently block ITC for that financial year, even if purchases are genuine.
- Administrative finality for the tax system: The Court accepted the government’s policy concern that GST relies on time-bound reporting and reconciliation; therefore, statutory deadlines help prevent uncertainty and repeated reopening of accounts.
- Constitutional clarity: The ruling clarifies that ITC is not treated as an automatic property right; it becomes enforceable only after meeting all statutory conditions, including the time limit.
- Practical compliance takeaway: Registered persons should implement return-filing controls and reconciliation well before year-end deadlines, because courts may not grant equitable relaxation once Section 16(4) applies.
4. Legal Issue(s) Decided and the Court’s Decision with reasoning
- Issue 1: Whether Section 16(4) CGST/BGST is unconstitutional for violating Articles 14 and 300A
- Decision: Upheld as constitutionally valid.
- Reasoning: ITC is conditional; no vested property right arises unless statutory conditions (including Section 16(4)) are satisfied.
- Issue 2: Whether Section 16(4) should be read down or treated as directory (not mandatory)
- Decision: Rejected; provision is mandatory.
- Reasoning: Language is clear (“shall not be entitled”); no ambiguity justifying reading down. Presumption of constitutionality applies.
- Issue 3: Whether the cut-off date is arbitrary / unreasonable restriction on trade under Article 19(1)(g)
- Decision: Rejected.
- Reasoning: Uniform fiscal legislation with a rational compliance structure cannot be struck down merely because it imposes a deadline; the Court found the rationale sufficient.
- Issue 4: Whether the petitioners could get relief against disallowance orders based on late GSTR-3B filing
- Decision: No relief; writ petitions dismissed.
- Reasoning: Since Section 16(4) was upheld and applies, departmental disallowance of ITC for delayed returns could not be interfered with in writ jurisdiction on this ground.
5. Judgments Referred by Parties
- Vinoy Viswam v. Union of India (2017) 7 SCC 59 (relied upon by petitioners for Article 14 argument)
- Modern Dental College and Research Centre v. State of Madhya Pradesh (2016) 7 SCC 353 (relied upon by petitioners for proportionality / reasonableness)
- K.T. Moopil Nair v. State of Kerala AIR 1961 SC 552 (referred in submissions)
- Apfert Technologies Pvt. Ltd. v. Union of India (Punjab & Haryana High Court; stated to be affirmed by Supreme Court, as argued by petitioners)
6. Judgments Relied Upon or Cited by Court
- Jilubhai Nanbhai Khachar v. State of Gujarat 1995 Supp (1) SCC 596 (on the concept of “property” under Article 300A)
- ALD Automotive Pvt. Ltd. v. Commercial Tax Officer (2019) 13 SCC 225 (ITC as concession; time-limit validity)
- Godrej & Boyce Mfg. Co. Pvt. Ltd. v. Commissioner of Sales Tax (1992) 3 SCC 624 (referred within ALD Automotive discussion)
- Jayam and Company v. Assistant Commissioner (2016) 15 SCC 125 (strict compliance for ITC as concession)
7. Case Title
M/s R.K. Pharmacheticals Vs. The State of Bihar
8. Case Number
Civil Writ Jurisdiction Case No. 9108 of 2021
9. Coram and Names of Judges
- Hon’ble Mr. Justice Chakradhari Sharan Singh
- Hon’ble Mr. Justice Madhuresh Prasad
10. Names of Advocates and who they appeared for
- For the Petitioners (lead counsel in the batch): Mr. S.D. Sanjay (Senior Counsel), Mr. D.V. Pathy, Mr. Gautam Kumar Kejriwal, Mr. Sriram Krishna, Mr. Akshay Lal Pandit, Mr. Satish Chandra Jha-3.
- For the Union of India: Dr. K.N. Singh, learned Additional Solicitor General (ASG).
- For the State of Bihar: Mr. P.K. Shahi, learned Advocate General, Bihar; and Mr. Vivek Prasad, learned GP-7.
11. Link to Judgment
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