HC Reads Down Section 16(2)(c) to Protect Bona Fide ITC Claims

Case Details: Instakart Services Pvt. Ltd. vs. Union of India (2026) 42 Centax 48 (Kar.)

Judiciary and Counsel Details

• S.R.Krishna Kumar, J.
• S/Shri Tarun Gulati, Sr. Counsel & Pradeep Nayak, Adv., for the Petitioner.
• S/Shri Madanan Pillai, CGC, Hema Kumar, AGA & M. Unnikrishnan, Adv., for the Respondent.

Facts of the Case

The petitioner, a private limited company registered under the CGST/KGST Act and engaged in logistics services, filed a writ petition challenging the validity of Section 16(2) (c) of the CGST/Karnataka GST (KGST) Act and Rule 36(4) of the CGST/KGST Rules. The petitioner sought alternative relief, namely that the said provisions be read down to allow input tax credit (ITC) to bona fide recipients who had complied with the other conditions under Section 16(2), despite the non-payment of tax by suppliers. A restraint against the enforcement of the said provisions against the petitioner was also sought. The issue framed concerned constitutional validity vis-à-vis Articles 14, 19(1) (g), 265 and 300A or the need to read down the provisions. The matter was placed before the High Court.

High Court Held

The High Court held that co-ordinate benches had examined the identical controversy, and that the petition deserved disposal in accordance with such judgments. The Court held that the provisions contained in Section 16(2) (c) of the CGST/KGST Act and Rule 36(4) of the CGST/KGST Rules were to be read down. It was held that such reading down would allow the benefit of ITC to bona fide recipients who had complied with all other conditions under Section 16(2) of the CGST/KGST Act, despite any fault, lapse or non-payment of tax to the government by suppliers. Accordingly, the petition was disposed of in these terms.

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