2026-VIL-1249-RAJ
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SGST High Court Cases

GST - Constitutional validity of Rule 36(4) of the CGST Rules restricting ITC on invoices or debit notes not uploaded by suppliers under Section 37(1) of the CGST Act - Rule 36(4) was inserted restricting availment of ITC in respect of invoices or debit notes not uploaded by suppliers to a prescribed limit of the eligible credit reflected in uploaded invoices, and the limit was subsequently reduced - Petitioners sought quashing of Rule 36(4) contending that it is ultra vires Section 16, contrary to Sections 37 and 42, that Section 43A was not notified, and that it penalises bona fide recipients in violation of Articles 14, 19 and 300A - Respondents contended that Rule 36(4) derives authority from Sections 16 and 164, was not introduced under Section 43A, and is a policy measure to curb fraudulent availment of ITC - Whether Rule 36(4) of the CGST Rules is ultra vires the CGST Act and unconstitutional - HELD - Three High Courts have dealt with the same issue and upheld the rule, and the matter is no longer res integra. Rule 36 and in particular sub-rule (4) derives power from Section 16 of the CGST Act as well as from the general powers conferred by the Act. Section 43A, having never been enforced, cannot be treated as the source of power of a rule. The Court is in respectful agreement with the view taken by the High Courts and sees no reason to take a contrary view - The challenge to the constitutional validity of Rule 36(4) of the CGST Rules fails and the petitions are disposed of accordingly - Maintainability of challenge to show cause notices issued for reversal of ITC on the ground of mismatch under Rule 36(4) of the CGST Rules - Respondents issued Form GST DRC-01A calling upon the Petitioner to reverse ITC on the ground of mismatch between the ITC availed and the amounts reflected in GSTR-2A, and the Petitioners assailed the notices along with the vires of Rule 36(4) - Whether the SCN are liable to be quashed at the stage of their issuance - HELD - The challenge to the show cause notices is primarily founded on the challenge to the vires of Rule 36(4), and since that challenge has failed the Court is not persuaded to quash the notices. The Hon'ble Supreme Court has held that no writ lies against the issuance of a show cause notice and such a writ petition would not be maintainable. The Petitioners are at liberty to avail the appropriate remedies by appearing before the competent authorities and placing whatever material they wish to rely upon - The Court declines to interfere with the show cause notices at this stage and the writ petitions are disposed of, with liberty to challenge any assessment orders in accordance with law.
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