Order Date – 25 February 2025

Parties: M/S High Tech Ecogreen Contractors LLP vs. The Joint Director, Directorate General of Goods and Services Tax Intelligence & Ors.

Facts –

• The Petitioner,  M/s High Tech Ecogreen Contractors LLP, engaged in works contract services, was served wwithashow-cause notice dated 23.12.2021 alleging wrong availment of Input Tax Credit (ITC) which is not allowable under the provision of Rule 36(4) of the CGST Rules.
• The petitioner also challenged the constitutional validity of Rule 36(4) of the CGST Rules, 2017, which restricted Input Tax Credit (ITC) claims based on non-appearance of invoices in GSTR-2A/2B.

Issue –

• Whether Rule 36(4) of the CGST Rules, 2017 is constitutionally valid?

Order –

• The Divisional Bench of Hon’ble High Court observed that Section 16 of the CGST Act and Rule 36 of CGST Rules are in relation to eligibility of a registered person who can avail input tax credit by furnishing required documents, whereas Section 43A of the CGST Act is defining procedure for furnishing returns for availing input tax credit.
• Further provisions of sub-section (2) of Section 164 are not restrictive of sub-Section (1) and after careful scrutiny of the CGST Act,  no doubt that Rule 36 or in particular sub-rule (4) of Rule 36 is framed as per the objects of the CGST Act and falls within the scope of general power conferred by sub-section (2) of Section 164 of the said Act.
• Another simple reason for not accepting the contention of the learned counsel for the petitioner that sub-rule (4) of Rule 36 derives power from subsection (4) of Section 43A is that since Section 43A has not been enforced at any point of time till its omission vide Finance Act, 2022, with effect from 01.10.2022, it is impossible to conclude that a rule or sub-rule derives power from a provision which has never been enforced.
• Hence there is no merit in the challenge of the petitioner to the validity of sub-rule (4) of Rule 36 of CGST Rules. Hence, the writ petition is dismissed, being devoid of any merit.