Provisions on limitation should be interpreted liberally in cases where genuine hardships are demonstrated

[Bimal jain]

The Hon’ble Calcutta High Court in the case of SHRUTI IRON PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER, STATE TAX, BALLY & SALKIA CHARGE & ORS. - 2024 (12) TMI 783 - CALCUTTA HIGH COURT disposed of the writ petition where pursuant to notice issued under Section 65 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), demand was confirmed against the Assessee without following proper procedure. Further, appeal of the Assessee was dismissed on grounds of limitation and the said order was to be set aside. Consequently, the Appellate Authority was to be directed to decide application of Assessee for condonation of delay on merits.

Facts:

M/s Shruti Iron (P.) Ltd. (“the Petitioner”) received a notice in Form GST ADT-01 from Assistant Commissioner (“the Respondent”) for an audit of its accounts for the period from July 01, 2017 to March 31, 2018, under Section 65 of the CGST Act. In response, the Petitioner submitted all the required documents. However, the final audit report dated August 26, 2022, directed the Petitioner to deposit disputed tax amounts, which the Petitioner disagreed with.

Following the disagreement, a show-cause notice in GST DRC-01 dated May 3, 2023, was issued, demanding payment of tax, interest and penalties amounting to significant sums under various heads, citing alleged violations under Section 16(2)(c) of the CGST Act and Section 73 of the CGST Act.

The Petitioner entrusted the matter to its advocate, who, due to a mix-up, failed to respond to the show cause notice. Consequently, an ex-parte adjudication order was passed on October 16, 2023, confirming the tax demands and issuing a summary order in FORM GST DRC-07.

The Petitioner filed an appeal on March 19, 2024, but exceeded the statutory period under Section 107 of the CGST Act by 30 days due to the serious illness of its director, who handles financial and tax matters. Despite providing detailed explanations and supporting documents for the delay, the Appellate Authority rejected the appeal vide Order dated June 28, 2024 (“the Impugned Order”), on the grounds of limitation.

The Petitioner contended that the unsigned show cause notice, summary order and adjudication order are void and unenforceable. Furthermore, the proceedings under Section 73 of the CGST Act for the financial year 2017-18 are barred by limitation, as the statutory period for initiating and concluding such proceedings had expired before the issuance of the notice.

The Petitioner also claims that the tax demands are substantively erroneous, as it had paid all due taxes and claimed Input Tax Credit (“ITC”) in accordance with the law. The Petitioner further highlights that the liabilities of suppliers cannot legally be transferred to purchasers.

The Petitioner highlights that it had submitted a detailed reply to the pre-show cause notice issued in Form GST DRC-01A, refuting the allegations. However, Respondent No. 1 did not take any recovery action against the defaulting suppliers, which is a statutory prerequisite for demanding disputed ITC from the recipient, and also failed to consider the submissions before issuing the Impugned show-cause notice.

Aggrieved by the orders and the procedural irregularities, the petitioner has approached this Hon'ble Court under Article 226 of the Constitution, seeking relief against the actions and proceedings initiated by Respondent.

Issue:

Whether an order can be set aside due to failure to follow proper procedure and improper dismissal of appeal on limitation grounds?

Held:

The Hon’ble Calcutta High Court in the case of SHRUTI IRON PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER, STATE TAX, BALLY & SALKIA CHARGE & ORS. - 2024 (12) TMI 783 - CALCUTTA HIGH COURT held as under:

• Observed that, provisions on limitation should be interpreted liberally in cases where genuine hardships are demonstrated, particularly in light of judicial precedents supporting such relief.
• Relied on, S.K. CHAKRABORTY & SONS VERSUS UNION OF INDIA & ORS. - 2023 (12) TMI 290 - CALCUTTA HIGH COURT, the Division Bench of Hon’ble Calcutta High Court held that Section 107 of the CGST Act does not exclude the applicability of the Limitation Act, 1963 (“the Limitation Act”) expressly. It does not exclude the applicability of the Act impliedly also if one has to consider the provisions of Section 108 of the CGST Act which provides for a power of revision to the designated authority, against an order of adjudication. In case of revision a far more enlarged period of time for the Revisional Authority to intervene has been prescribed. Two periods of limitations have been prescribed for two different authorities namely, the Appellate Authority and the Revisional Authority in respect of the same order of adjudication. Any interference with the order of adjudication either by the Appellate Authority or by the Revisional Authority would have an effect on the defaulter/notice. Section 107 of the CGST Act does not have a non-obstante clause rendering Section 29(2) of the Limitation Act, non-applicable. In absence of specific exclusion of the Section 5 of the Limitation Act it would be improper to read an implied exclusion thereof. Moreover, Section 107 of the CGST Act, it its entirely has not expressly stated that, Section 5 of the Limitation Act stands excluded. Hence, since provisions of Section 5 of the Limitation Act, have not been expressly or impliedly excluded by Section 107 of the CGST Act, by virtue of Section 29(2) of the Limitation Act, Section 5 of the Limitation Act, stands attracted. The prescribed period of 30 days from the date of communication of the adjudication order and the discretionary period of 30 days thereafter, aggregating to 60 days is not final and that, in given facts and circumstances of a case, the period for filling the appeal can be extended by the Appellate Authority.
• Held that, in light of the procedural irregularities and the arbitrary nature of the actions, the Petitioner's case is meritorious. Accordingly, the writ petition is allowed, and the appellate Order dated June 28, 2024 is quashed. The Appellate Authority is requested to consider and decide the application for condonation of delay filled by the Petitioner on merits. If, the explanations advance for condonation of delay are accepted to be sufficient, the Appellate Authority may condone the delay in preferring the appeal, hear and dispose the appeal on merit.

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