2025 (1) TMI 299 - HC - GST

Legality, validity and propriety of notification Nos. 13/2022, dated 05.07.2022, 9 and 56/2023, dated 31.03.2023 and 28.12.2023, respectively - Extension of maximum period of limitation prescribed under Section 73 (10) of the GST Act - repeated extensions given in purported exercise of Section 168A of the GST Act are arbitrary and violative of Article 14 of the Constitution or not - HELD THAT - A plain reading of Section 168A makes it clear that it gives power to the Government to the extend time limit in special circumstances . The provision begins with a non-obstante clause and provides that on the recommendation of the Council, the time limit specified in or prescribed or notified under this Act can be extended. It is noteworthy that the time limit can be extended in respect of actions which cannot be completed or complied with due to force majeure . Sub-section (2) of Section 168A enables the Government to issue notification with retrospective effect. The explanation defines the expression force majeure . In the instant case, it is not in dispute that COVID-19 Pandemic falls within the ambit of force majeure . The contention of the petitioners is that the letter of the Home Department to Chief Secretaries issued on 22.03.2022 shows that COVID-19 Pandemic came to an end on 23.02.2022 and therefore restrictions imposed under the Disaster Management Act, 2005 were decided to be lifted. Thus, when impugned notifications were issued, the Pandemic was no more there and therefore force majeure conditions are not satisfied. The argument on the first blush appears to be attractive, but, lost much of its shine when minutely examined in the light of language employed in Section 168A of the GST Act. Section 168A in no uncertain terms makes it clear that the time limit can be extended in respect of actions which could not be completed or complied with, due to force majeure. The purpose behind using the phrase on the recommendation of Council is to equip the Government with the expert opinion of an expert constitutional body i.e., GST Council. This enables the Government to take an informed decision based on such opinion of Council. Since all the States have participation in the Council, the recommendation of Council will certainly be in consonance with doctrine of cooperative federalism. The decision of Government on such recommendation in the shape of notification will certainly has serious impact on taxpayers. Section 73 (10) prescribes period of three years from due date for issuing order and Section 75 (10) is pregnant with a deeming clause that if order is not passed within three years as per Section 73 (10) the proceeding shall be deemed to be concluded. Hence, notification extending time limit issued under Section 168A can impact the tax payer for the purpose of conclusion of proceedings as per conjoint reading of Section 73 (10) and 75 (10) of the GST Act. Conclusion - The validity of most notifications extending limitation periods under Section 168A upheld. The words 'in respect of actions' are very wide and bring within its ambit the previous actions of COVID-19 period, which could not be completed or complied with, due to force majeure. These Writ Petitions are accordingly disposed of by reserving liberty to the petitioners to avail the remedy of statutory appeal.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily addresses the following issues:

• The legality and validity of notifications extending the limitation period under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act).
• Whether the notifications were issued in compliance with the requirement of a recommendation from the GST Council as stipulated in Section 168A.
• The applicability of the Supreme Court's suo motu orders extending limitation periods due to the COVID-19 pandemic to proceedings under the GST Act.
• Whether the notifications extending the limitation period were arbitrary or violative of Article 14 of the Constitution.
• The interpretation of the terms "recommendation" and "ratification" in the context of the GST Council's role.
• The scope of judicial review concerning the issuance of notifications under Section 168A.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality and Validity of Notifications

• Relevant Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend the time limit in special circumstances, such as force majeure events.
• Court's Interpretation and Reasoning: The court examined whether the COVID-19 pandemic constituted a force majeure event justifying the extension of limitation periods.
• Key Evidence and Findings: The court noted that COVID-19 was acknowledged as a force majeure event, and the pandemic's impact on administrative functions justified the extensions.
• Application of Law to Facts: The court found that the notifications were issued within the legal framework of Section 168A, considering the pandemic's impact.
• Treatment of Competing Arguments: The petitioners argued that the pandemic had ended by the time of the notifications, but the court held that the extensions were related to actions hindered by the pandemic.
• Conclusions: The notifications were deemed valid under Section 168A due to the force majeure conditions caused by COVID-19.

Issue 2: Compliance with GST Council Recommendations

• Relevant Legal Framework and Precedents: Section 168A requires notifications to be issued on the recommendation of the GST Council.
• Court's Interpretation and Reasoning: The court emphasized the necessity of prior recommendations from the GST Council for issuing notifications.
• Key Evidence and Findings: Notification No. 56/2023 was issued without prior recommendation, which was later ratified by the GST Council.
• Application of Law to Facts: The court found that ratification cannot substitute for the statutory requirement of prior recommendation.
• Treatment of Competing Arguments: The respondents argued that ratification sufficed, but the court disagreed, emphasizing the statutory mandate.
• Conclusions: Notification No. 56/2023 was invalid due to the lack of prior GST Council recommendation.

Issue 3: Applicability of Supreme Court's Suo Motu Orders

• Relevant Legal Framework and Precedents: The Supreme Court's orders extended limitation periods across various laws due to COVID-19.
• Court's Interpretation and Reasoning: The court held that the Supreme Court's orders were applicable to GST proceedings, excluding the period from 15.03.2020 to 28.02.2022 from the limitation calculation.
• Key Evidence and Findings: The court noted the Supreme Court's orders were binding and applicable to all judicial and quasi-judicial proceedings.
• Application of Law to Facts: The exclusion of the specified period from limitation calculations was upheld.
• Treatment of Competing Arguments: Petitioners argued against applicability, but the court relied on the Supreme Court's binding orders.
• Conclusions: The Supreme Court's orders applied, rendering some challenges to the notifications moot.

Issue 4: Arbitrary Nature and Article 14 Violations

• Relevant Legal Framework and Precedents: Article 14 of the Constitution ensures equality before the law.
• Court's Interpretation and Reasoning: The court assessed whether the notifications discriminated against taxpayers.
• Key Evidence and Findings: The court found no discriminatory treatment, as the extensions were justified by administrative difficulties caused by the pandemic.
• Application of Law to Facts: The court held that the extensions were reasonable and not arbitrary.
• Treatment of Competing Arguments: Petitioners claimed discrimination, but the court found the extensions applied uniformly.
• Conclusions: The notifications did not violate Article 14.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The words 'in respect of actions' are very wide and bring within its ambit the previous actions of COVID-19 period, which could not be completed or complied with, due to force majeure."
• Core Principles Established: The necessity of GST Council recommendations for issuing notifications under Section 168A; the applicability of Supreme Court's suo motu orders to GST proceedings.
• Final Determinations on Each Issue: Notifications were valid under Section 168A; Notification No. 56/2023 was invalid due to lack of prior recommendation; Supreme Court's orders applied, affecting limitation calculations.

In conclusion, the court upheld the validity of most notifications extending limitation periods under Section 168A, emphasizing the applicability of the Supreme Court's orders and the necessity of GST Council recommendations. Notification No. 56/2023 was invalidated due to procedural deficiencies. The court directed petitioners to pursue statutory appeals, considering the Supreme Court's orders on limitation.