Case Title: Bobieri Creazon Fashion Accessories Pvt. Ltd. v. State of Haryana and Another
Court: Punjab and Haryana High Court
Petition No.: CWP-34258-2024
Category of Dispute: Input Tax Credit (ITC) – Validity of Section 16(2)(c) of the CGST Act
Date of Judgment: 18 December 2024
Relevant Sections: Section 16(2)(c) of the CGST Act, 2017
Facts (Para 1–3)
The petitioner, Bobieri Creazon Fashion Accessories Pvt. Ltd., approached the Punjab and Haryana High Court challenging the constitutional validity of Section 16(2)(c) of the CGST Act, 2017. The petitioner contended that the said provision unjustly denies Input Tax Credit (ITC) to a bona fide purchaser who has duly paid GST to the supplier, merely because the supplier defaults in remitting that tax to the Government. The grievance raised was that this section effectively makes the buyer’s right to ITC dependent on the supplier’s compliance, which is beyond the buyer’s control.
Questions Before the Court (Para 3–5)
The core issue before the Court was whether Section 16(2)(c) of the CGST Act — which makes ITC conditional upon the actual payment of tax to the Government by the supplier — violates the constitutional rights of a bona fide purchaser who has fulfilled all statutory obligations and holds valid tax invoices and proof of payment.
Observations (Para 5–8)
The Court noted that similar petitions challenging Section 16(2)(c) are already pending before it, raising identical legal and constitutional issues. Recognizing the recurring nature of the controversy, the Court observed that the provision has caused significant hardship to genuine taxpayers and that the matter merits detailed adjudication after hearing all stakeholders, including the Union of India, which was accordingly impleaded as a party.
Judgment (Para 8–10)
The Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth issued notice of motion and directed the State to file its reply by the next date of hearing, 06 March 2025. Importantly, the Court granted interim protection, ordering that no coercive steps shall be taken against the petitioner in the meantime. This effectively safeguards the petitioner from recovery or penal proceedings pending adjudication of the constitutional issue.
Summary of Referred Cases
| Case Name | Court | Issue | Verdict / Observation |
|---|---|---|---|
| Similar petitions pending before P&H High Court | Punjab & Haryana HC | Challenge to Section 16(2)(c) | Pending adjudication on the constitutionality of ITC denial due to supplier default |
Between Fine Lines
This interim order is a crucial relief for bona fide taxpayers, emphasizing that buyers who have duly paid GST cannot be penalized for the supplier’s non-compliance. It signals judicial recognition of the inequity within Section 16(2)(c), keeping the matter open for a possible constitutional reinterpretation. Until final disposal, taxpayers facing similar issues may rely on this precedent to seek protection from coercive action.
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(c) of CGST Act regarding ITC denial to bona fide purchasers.){kind=link}