Provisions of Section 16(2)(c) of CGST Act challenged before Tripura HC

The Tripura High Court is considering a challenge to Section 16(2)(c) of the CGST Act, which restricts Input Tax Credit (ITC) if the supplier hasn't paid the tax to the government. Sahil Enterprises argues this is unfair as they've paid the tax to the seller and have no control over its deposit, leading to potential double taxation. They also claim the provision violates constitutional rights. The court has issued notice to the Attorney General and is considering interim relief for the petitioner.

The Hon'ble High Court of Tripura in Re: Sahil Enterprises v. Union of India [WP(C) NO. 531 Of 2021 dated August 09, 2021] issued notice for the limited purpose of removing attachment of Input Tax Credit ('ITC') ledger of assessee.

Facts

Sahil Enterprises ('the Petitioner') has submitted that their ITC account is attached by Department on the ground that, supplier has not deposited the taxes and hence the Petitioner was not eligible to ITC in terms of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 ('the CGST Act'). The Petitioner has challenged the provisions contained under Section 16(2)(c) of the CGST Act, which states that, registered person shall be entitled to ITC only if the tax charged in respect of such supply has been actually paid to the Government by the supplier either in cash or through utilization of ITC admissible in respect of the said supply.

The Petitioner contends that after paying taxes to the seller at the time of purchases, the Petitioner has no control over the seller to ensure that such tax is deposited with the Government. Denying ITC to the Petitioner where they have already paid tax would amount to double taxation.

Further, the provision contained in Section 16(2)(c) of CGST Act is in violation of Articles 14 [i.e., the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India], 19(1)(g) [i.e., all citizens shall have right to practice any profession, or to carry on any occupation, trade or business] and 300A [i.e., persons not to be deprived of property save by authority of law] of the Constitution of India.

Held

The Hon'ble High Court of Tripura in Re: Sahil Enterprises v. Union of India WP(C) NO. 531 Of 2021 dated August 09, 2021 held that, the issue require consideration. Since legislation framed by the Parliament is under challenge, issued notice to the learned Attorney General.

Learned Asstt. Solicitor General and learned counsel Mr. Paramartha Datta waived notice on behalf of Respondents. For the limited purpose of considering the Petitioner's request for interim relief for removing attachment of the ITC ledger, issued notice returnable on August 23, 2021.