Writ against denial of input tax credit not entertained as alternate remedy of appeal before Tribunal exists: HC

By | October 13, 2025
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A court directed a taxpayer to use an interim circular to stay recovery and await the formation of the GST Appellate Tribunal.

On Interim Relief When the GST Tribunal is Not Constituted

A taxpayer who wants to appeal an order but cannot because the GST Appellate Tribunal isn’t functional can get interim protection from recovery action by following the procedure laid out in the relevant government circular.

Issue

What is the interim remedy for a taxpayer who is aggrieved by a first appellate order but cannot file a further appeal because the GST Appellate Tribunal has not yet been constituted?

Facts

The petitioner challenged a first appellate order but had no further statutory remedy available as the GST Appellate Tribunal was not yet functional. 1The Revenue department pointed to a Trade Circular that was issued to address this specific situation. 2This circular provides an interim safeguard: a taxpayer can defer recovery action by submitting a declaration in a prescribed format (Annexure-1). 3The circular also clarifies that the legal time limit to file the appeal will only commence once the Tribunal is constituted and this is formally communicated to the taxpayer. 4The petitioner’s case fell within the timeline to avail the benefits of this circular. 

Decision

 

The High Court held that the Trade Circular provides substantial protection to the petitioner.  It disposed of the petition with the following directions:

  • The petitioner must file the required Annexure-1 within four weeks to claim the benefits of the circular. 
  • Once this is done, the petitioner is protected from any recovery action. 
  • The petitioner has the liberty to prefer a statutory appeal once the Tribunal is constituted and becomes functional. 

On Challenging the Constitutional Validity of Section 16(2)(c)

The court declined to examine the constitutional validity of Section 16(2)(c) of the CGST Act at this stage, holding that the taxpayer must first exhaust the available statutory appellate remedies.

Issue

Should a High Court entertain a writ petition that challenges the constitutional validity of Section 16(2)(c) of the CGST Act, 2017, when a statutory appeal on the merits of the case is the primary available remedy?

Facts

The petitioner’s Input Tax Credit (ITC) was denied, likely because their supplier had not paid the tax to the government. 10In their writ petition, the petitioner challenged the constitutional validity of Section 16(2)(c), arguing that it violates Articles 14, 19(1)(g), and 21 of the Constitution. 11The Revenue opposed the petition, citing the alternate remedy of an appeal and pointing out that other High Courts have already upheld the validity of Section 16(2)(c). 

Decision

The High Court ruled that it would not entertain the constitutional challenge at this stage. 

  • It observed that the petitioner’s contention of a lack of findings in the order doesn’t justify bypassing the alternate remedy rule. 
  • The court held that if the petitioner fails in their statutory appeal before the Tribunal, they may then challenge the constitutional validity of Section 16(2)(c) along with the Tribunal’s final order. 
  • All contentions on the merits of the case were kept open to be argued before the Tribunal. 
HIGH COURT OF BOMBAY
Globe Mobility (P.) Ltd.
v.
Union of India
M.S. Sonak and Advait M. Sethna, JJ.
WRIT PETITION NO. 10284 OF 2025
SEPTEMBER  16, 2025
Bharat Raichandani and Dhanistha Kawale for the Petitioner. Ms. S. D. Vyas, Additional G.P and M.M. Pabale, AGP for the Respondent.
ORDER
1. Heard learned Counsel for the parties.
2. The Petitioner challenges the order dated 24 February 2025, passed by the First Appellate Authority. As against this order, the Petitioner has a remedy before the GST Tribunal, which is presently not constituted.
3. Mr. Raichandani submits that since there is no Tribunal constituted, the Petitioner has no other alternate or efficacious remedy. Besides, he submits that the Petitioner has challenged the constitutional validity of Section 16(2)(c) of the CGST Act/MGST Act as violative of Articles 14, 19(1)(g), and 21 of the Constitution of India. He points out that, according to him, the order in the original or even the impugned order contains no findings on the several contentions raised by the Petitioner. He submits that these are good enough reasons for this Court to entertain this Petition.
4. Ms Vyas refers to a Trade Circular dated 13 August 2024, which outlines the guidelines for recovering outstanding dues in cases where the First Appeal has been disposed of until the Appellate Tribunal is constituted and begins functioning. She submits that the Petitioner can simply complete a form in Annexure I, and once this form is submitted, no recoveries will be effected. Additionally, the limitation period for filing an Appeal before the Tribunal will start from the date of its constitution and commencement of operations, which will be communicated to the party/assesee.
5. Ms. Vyas submitted that the constitutional validity of Section 16(2)(c) of the CGST Act/MGST Act has already been upheld by the Gujarat, Kerala, and Patna High Courts and, to the best of her knowledge, there are no decisions of any other High Court striking down this provision. She submitted that the validity is now challenged only as a ploy to defeat the objection about exhaustion of the alternate remedy.
6. Mr Raichandani has submitted that the Petitioner is entitled to succeed in this matter even without going into the issue of the constitutional validity of Section 16(2)(c) of the CGST/MGST Act. The argument about there being no findings, prima facie, does not appeal to us. Therefore, this is not a case where we must deviate from the practice of exhaustion of alternate remedies. Suppose the Petitioner fails in the Appeal, in that case, it will always be open to the Petitioner to challenge the constitutional validity of Section 16(2)(c) of the CGST/MGST Act together with a challenge to the Tribunal’s order. As it is, where a case can be disposed of on a ground not involving a challenge to the constitutional validity of a statutory provision, such a course must be preferred. Therefore, it is not necessary to entertain this Petition at this stage on such a ground.
7. The Trade Circular dated 13 August 2024 substantially protects the Petitioner. The Petitioner had instituted this Petition on 17 April 2025, i.e., within the timeline prescribed for filing the necessary form in terms of the Trade Circular dated 13 August 2024. Therefore, if the Petitioner now files the necessary form prescribed in Annexure-1 to this Trade Circular, we are sure that the Petitioner will secure all the benefits granted by this Circular. This position is also not disputed by Ms. Vyas, the learned Counsel for the Respondents.
8. The required form in Annexure-1 to the Trade Circular must now be submitted within four weeks of uploading this order if the Petitioner wishes to claim the benefits under the said Trade Circular. Once the Tribunal is constituted and begins functioning, the Petitioner will be entitled to appeal the impugned order dated 24 February 2025. If the petitioner’s appeal fails, they retain the liberty to challenge the Constitutional validity.
9. All contentions of all parties on merits are left open to be decided by the Tribunal in accordance with law and on their own merits.
10. With the above liberties, we dispose of this Petition. No costs.