2024 (12) TMI 440 - HC - GST

Challenge to assessment orders of 2017-18, 2018-19 and 2019-20, primarily on the ground of limitation - extension of limitation, as provided under Section 73 (10) of the Central Goods and Services Tax Act, 2017 and the Bihar Goods and Services Tax Act, 2017 - extension beyond the period of three years from the 31st of December of the subject year - Requirement to issue SCN - principles of natural justice. HELD THAT - The extended date of filing of return under Section 44(10) of the GST Act for the years 2017-18, 2018-19 and 2019-20 were respectively on 07.02.2020, 31.12.2020 and 31.03.2021. The three-year period under Section 73 (10) of GST Act hence commences from such dates and would have normally expired respectively on 07.02.2023, 31.12.2023 and 31.03.2024. For the year 2017-18 the period between 15.03.2020 to 28.02.2022; 2 years minus 14 days come within the period of limitation. Hence the period of 1 year, 11 months and 16 days have to be excluded for the year 2017-18, which would take the limitation period to 21.01.2025. In the financial year 2018-19, the period between 01.01.2021 and 28.02.2022 should be excluded from the three-year period commencing from the extended date of filing amended returns for that year; i.e between 31.03.2020 to 31.12.2023. The 01 year 02 months so excluded would extend the limitation from 31.12.2023 to 28.02.2025, for the assessment year 2018-19. Likewise, for the financial year 2019-20 the extended due date of filing of return falls on 31.03.2021 and the limitation under Section 73 (10) of the GST Act extends upto 31.03.2024. The period excluded for reason of the Covid-19 pandemic, coming within the period of limitation, hence would be 11 months which would enable extension of limitation under Section 73 (10) of the GST Act from 31.03.2024 to 28.02.2025. The extended dates as per the notifications fall within the period of limitation; when the exclusion enabled by the Hon ble Supreme Court; between 15.03.2020 and 28.02.2022 is applied. Requirement to issue notice - HELD THAT - When a reply has been submitted to the notice issued under Section 73 and if any adverse order is contemplated, without even a request for personal hearing, the Assessing Officer has to issue a notice providing an opportunity of hearing. This is the statutory mandate, from which there is no escape. The assessment orders impugned have been passed without granting a personal hearing under Section 75 (4) of the GST enactments, in which circumstance, the orders are set aside on violation of the statutory mandate for notice of personal hearing and the matters are remitted to the respective Assessing Officers to issue notice for affording an opportunity of personal hearing, to hear the assessees if they appear on the date notified or once adjourned and pass orders within three months from the date of this judgment or within the limitation period provided, if not expired, whichever falls later. Petition allowed.

Issues Involved:

1. Extension of limitation under Section 73 (10) of the GST Act due to the COVID-19 pandemic.
2. Validity of notifications issued under Section 168A of the GST Act.
3. Requirement of notice under Section 61 and Rule 99 of the GST Act before initiating proceedings under Section 73.
4. Violation of principles of natural justice due to non-provision of personal hearing as mandated under Section 75 (4) of the GST Act.

Issue-wise Detailed Analysis:

1. Extension of Limitation:

The primary issue addressed in this judgment pertains to the extension of the limitation period for assessment orders under Section 73 (10) of the GST Act due to the COVID-19 pandemic. The petitioners challenged the extension, arguing that the notifications extending the limitation period were issued after the pandemic situation had subsided. The court examined the statutory provisions and the impact of the pandemic on statutory compliances. It was noted that the Hon'ble Supreme Court had excluded the period from 15.03.2020 to 28.02.2022 from the limitation period for judicial and quasi-judicial proceedings, recognizing the disruption caused by the pandemic. The court upheld the extensions, finding them consistent with the Supreme Court's directives and necessary to mitigate the difficulties faced during the pandemic.

2. Validity of Notifications under Section 168A:

The court addressed the petitioners' challenge to the notifications issued under Section 168A of the GST Act, which extended the limitation period. The petitioners argued that the notifications were not sustainable as they were issued when the pandemic was no longer a force majeure situation. The court analyzed the statutory framework and the recommendations of the GST Council, which were made in light of the pandemic's impact on tax administration. The court found that the notifications were issued with due consideration and in accordance with the statutory provisions, including retrospective effect as allowed under Section 168A. The court also noted the ratification of these notifications by the GST Council in subsequent meetings.

3. Requirement of Notice under Section 61 and Rule 99:

The petitioners contended that proceedings under Section 73 should be preceded by a notice under Section 61 and Rule 99 of the GST Act, which involves scrutiny of returns. The court clarified that Section 73 is a standalone provision that can be invoked independently when the Proper Officer identifies tax discrepancies, erroneous refunds, or wrongful claims of input tax credit. The court held that a notice under Section 61 is not a prerequisite for initiating proceedings under Section 73, as the latter involves a more significant level of discrepancy than mere scrutiny.

4. Violation of Principles of Natural Justice:

The court examined the petitioners' claims regarding the violation of natural justice due to the lack of personal hearings as required under Section 75 (4) of the GST Act. The court emphasized that the statutory mandate for a personal hearing is clear and must be adhered to when an adverse decision is contemplated. In cases where assessment orders were passed without granting a personal hearing, the court set aside those orders and remanded the matters to the respective Assessing Officers to provide an opportunity for a personal hearing. For petitions where a personal hearing was afforded, the court found no reason to interfere with the impugned orders.

Conclusion:

The court upheld the validity of the notifications extending the limitation period under the GST Act, recognizing the extraordinary circumstances of the COVID-19 pandemic. It clarified the procedural requirements under Sections 61, 73, and 75, ensuring adherence to principles of natural justice. The judgment balances statutory compliance with the need for fairness in tax administration during unprecedented times.

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