2024 (10) TMI 1166 - HC - GST

Constitutional Validity of N/N. 09/2023 dated 31-03-2023 - violation of provision of section 168A of the CGST Act - extension of time limit in an arbitrary manner - non-application of mind - violation of principles of natural justice - whether the N/N. 9/2023 issued by the Government of India on 31.03.2023 at Annexure-A can be said to be without any basis or without application of mind? HELD THAT - The explanation to Section 168A indicates as regards the time limit which has been fixed that notwithstanding anything contained in the Act, the Government may, on the recommendation of Council by notification, extend the time limit specified in or prescribed or notified under the Act. The explanation to the said Section indicates that the expression force majeure would include case of war, epidemic, flood, drought, fire, cyclone, earthquake, or any other calamity caused by nature otherwise affecting the implementation of any of the provision of the Act - A perusal of the discussion made in the GST Council in the 49th meeting held on 18.02.2023 which has been extracted hereinabove indicates that the Law Committee had considered the representation of various officers, the delay in the scrutiny and audit because of Covid-19 pandemic, the workload having been increased and that it not being capable that the proceedings be closed in terms of Subsection (10) of Section 173 by 30.09.2023, therefore, recommended an extension of a period of three months. The extension of the period of limitation in all proceedings before Courts and Tribunals is what was considered by the Hon ble Apex Court in the said decision and not matters pertaining to assessment, reassessment, show cause notice or the like issued by tax Authorities. Thus, the decision of the Hon ble Apex Court in suo motu proceedings 2022 (1) TMI 385 - SC ORDER would also not be applicable to the present facts and circumstances. The notification No.9/2023 dated 31.03.2023 at Annexure-A cannot be found fault with on the basis of the submission made by the Council for the petitioner. There are no grounds that have been made out in the present petition, so the petition is dismissed.

Issues Involved:

1. Validity of Notification No. 9/2023 dated 31-03-2023 under Section 168A of the CGST Act.
2. Legality of the extension of time limits for issuing show cause notices and orders under Section 73 of the CGST Act.
3. Binding nature of GST Council recommendations on the Union and States.
4. Applicability of the Supreme Court's decision on the extension of limitation periods to tax proceedings.

Issue-wise Detailed Analysis:

1. Validity of Notification No. 9/2023:

The petitioner challenged Notification No. 9/2023, arguing it was arbitrary, illegal, and issued without jurisdiction under Section 168A of the CGST Act. The petitioner contended that the notification extended the time limit for passing orders on show cause notices beyond the statutory period, without a valid basis. The court examined Section 168A, which allows the government to extend time limits in special circumstances, such as force majeure, including epidemics like COVID-19. The court found that the notification was issued based on the GST Council's recommendation, considering the pandemic's impact on tax administration. Thus, the notification was not without basis or application of mind.

2. Legality of the Extension of Time Limits:

The petitioner argued that the extension of time limits for issuing show cause notices and orders under Section 73 was unjustified, as the limitation period had expired on 30-09-2023. The court noted that the GST Council, in its 49th meeting, recommended extending the time limit due to delays caused by the pandemic. The extension was accepted by the Government of India and notified accordingly. The court held that the extension was valid, as it was based on a well-considered recommendation addressing the practical difficulties faced by tax authorities.

3. Binding Nature of GST Council Recommendations:

The petitioner relied on the Supreme Court's decision in Union of India vs. Mohit Minerals Pvt. Ltd., arguing that GST Council recommendations are not binding on the Union and States. The court clarified that while the recommendations are not binding, the Government of India voluntarily accepted the GST Council's recommendation to extend the time limits. Therefore, once accepted, the notification becomes binding on all concerned parties. The court rejected the petitioner's argument, stating that the government had the discretion to accept or reject the recommendations.

4. Applicability of Supreme Court's Decision on Limitation Periods:

The petitioner cited a Supreme Court decision that extended limitation periods during the COVID-19 pandemic for judicial proceedings, arguing it should apply to tax proceedings as well. The court distinguished between judicial proceedings and administrative actions like tax assessments and show cause notices. The Supreme Court's decision pertained to court and tribunal proceedings, not tax authority actions. Therefore, the court held that the decision did not apply to the present case, and the extension of time limits by the GST Council and Government of India was valid.

Conclusion:

The court dismissed the petition, upholding the validity of Notification No. 9/2023 and the extension of time limits for issuing show cause notices and orders under Section 73. The court found no grounds to challenge the notification, as it was based on a legitimate recommendation by the GST Council and accepted by the Government of India. The court also granted the petitioner 21 days to file an appeal, allowing the appellate authority to consider the appeal without addressing the limitation issue, given the petitioner's misconception about the notification's validity. This order was specific to the case's peculiar facts and circumstances and was not to be treated as a precedent.

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