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TMI Blog2024 (6) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for the F.Y. 2017-18 - Challenge to N/N. 09/2023-Central Tax (CGST) dated 31.3.2023 issued by the Government of India and N/N. 515/XI-2-23-9 (47)/17-T.C.215-U.P.Act-1-2017-Order-(273)-2023 dated 24.4.2023 issued by the State Government under Section 168A of the Central Goods and Service Tax Act, 2017 and the U.P. Goods and Service Tax Act, 2017 - Interpretation of force majeure in the context of legislative action. The submission advanced by learned Senior counsel and other counsel for the petitioners that since adjudication notices were not issued, the period of limitation never started running and that there was no requirement to conduct scrutiny or audit/before issuance of those and therefore, the revenue authorities were not disabled from conducting that exercise, requires serious consideration. HELD THAT:- The powers under Section 168A of the Act is legislative and not an administrative power. While submissions have been advanced by some of learned counsel for the petitioners suggesting, the power under Section 168A of the Act was an administrative or executive power, at the same time, as submitted by Sri Mahajan, there can be no doubt as to the true nature of that power. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. Thus, the consideration offered by the Council in its 47th and 49th meetings, as has been extracted and discussed above was relevant to the exercise of power under Section 168A of the Central Act and the State Act. Neither the existence of material on which the discussion had arisen nor the discussion itself may be described as extraneous or irrelevant to the statutory requirement of Section 168A of the Act. Interpretation of force majeure in the context of legislative action - HELD THAT:- The legislative wisdom must remain insulated from that judicial query. Under the Constitutional scheme of division of powers, Courts may never be enthusiastic and may remain disinclined to test the subjective satisfaction of legislatures in enacting laws. In fact, the Courts are neither equipped nor they are expected to undertake that exercise - By its very nature of force majeure circumstance as advanced by learned Senior Counsel for the petitioners and other learned counsel for the petitioners, remains unpredictable. Both as to its occurrence, duration of its continuance and the impact that it may leave, a force majeure event remains a mystery or atleast unpredictable to the human mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.C., Gaurav Mahajan, Gopal Verma, A.S.G.I., C.S.C., Gaurav Mahajan, Naveen Chandra Gupta, A.S.G.I., Amit Mahajan, C.S.C., Naveen Chandra Gupta, C.S.C., Gopal Verma, Manoj Kumar Sinha, Rajneesh Tripathi, Sr. Advocate, A.S.G.I., C.S.C., Parv Agarwal ORDER HON'BLE DONADI RAMESH, J. 1. Heard Sri Rakesh Ranjan Agarwal learned Senior Counsel assisted by Sri Suyash Agarwal, Sri Divyanshu Agarwal and Sri Vinayak Mittal, Sri Shambhu Chopra learned Senior Counsel assisted by Sri Rajnish Tripathi, Sri Praveen Kumar, Sri Nishant Mishra, Sri Atul Gupta, Sri Abhinav Mehrotra, Sri Venkat Prasad Pasupaleti (through video conferencing) and Sri Ayush Mishra, learned counsel for the petitioner, Sri S.P. Singh, learned ASGI assisted by Sri N.C. Gupta and Sri Gopal Verma, Sri Anant Tiwari, Sri O.P. Mishra, Sri K.J. Shukla, Sri Chandra Prakash Yadav and Sri Arvind Kumar Goswami learned counsel for the Union of India and Goods Service Tax Council, Sri Gaurav Mahajan learned Senior Standing Counsel, Sri Amit Mahajan learned Senior Standing Counsel, Sri Krishna Agarwal learned Senior Standing Counsel and Sri Parv Agarwal learned Senior Standing Counsel for the Central Board of Indirect Taxes and Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2024 M/S Neptune Suppliers Private Limited Vs. Goods And Service Tax Council And 4 Others 2017-18 17. 897 of 2024 M/S Subhash Infraengineers Pvt. Ltd. Vs. Union Of India And 4 Others 2017-18 18. 902 of 2024 M/S Subhash Infraengineers Pvt Ltd. Vs.Union Of India And 4 Others 2017-18 3. By earlier order, we had consolidated the above described and other petitions raising same and/or similar challenge. Since, only legal issues are involved, Counter Affidavits were required to be filed by the respondents in the lead case i.e. Writ Tax No. 1256 of 2023 (M/S Graziano Trasmissioni India Pvt. Ltd. Vs. Goods And Services Tax And 5 Others). Copy of those Counter Affidavits were directed to be circulated to all counsel for the petitioners, in individual petitions. Also, permission was granted to individual counsel for the petitioners-to serve their Rejoinder Affidavits, treating the Counter Affidavit circulated in the lead case to be the Counter Affidavit filed in their individual cases. Thus, pleadings have been exchanged between the parties, on deemed basis. 4. During the course of hearing, it was pointed out that other challenges are also involved in some of the other petitions. Thus refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, faced numerous difficulties in complying the new law. Therefore, the time for making compliances was extended and relaxations were granted by the Government, from time to time. It is on record - vide Notification dated 03.2.2020 issued under Section 44 (as it then existed) read with Rule 80 of the Rules framed under the Central Act, the last date for filing Annual Return for the F.Y. 2017-18 was extended - for the State of Uttar Pradesh, till 07 February 2020. Similar Notification No. 509 dated 05.02.2020 was issued by the State Government under the State Act. Correspondingly by operation of law, the time limitation contemplated under Section 73(10) of the Central Act and the State Act stood extended upto 06 February 2023. Also, correspondingly the time period for issuance of notice, by the Proper Officer (for that F.Y.), stood extended upto 08 November 2022. It is also a fact, just after the expiry of the last date for filing return for F.Y. 2017-18 expired on 07.2.2020, the country was hit by the first wave of the pandemic COVID-19, resulting in complete lockdown being declared, from 25 March 2020. 8. While the Parliament was not in session, the President promulgated Taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified under Section 73(10) of the Central Act for F.Y. 2017-18, upto 30 September 2023. Parallel notification was issued by the State Government being Notification No. 596, dated 21.7.20222 providing for similar extension of time. These notifications have not been challenged. 11. Last, vide Notification No. 9/2023 dated 31.03.2023 issued by the Government of India through the CBIC, the time limitation prescribed under Section 73(10) of the Central Act for F.Y. 2017-18, was extended upto 31.12.2023. A parallel notification came to be issued by the State Government Notification No. 515 of 2023 dated 24.04.2023, granting similar extension of time under the State Act. These notifications have also arisen under Section 168A of the Central Act and the State Act. Challenge has been laid only to this last set of Notifications dated 21.03.2023 (issued by the Central Government) and 24.04.2023 (issued by the State Government). 12. In the context of the above, Sri Rakesh Ranjan Agarwal, learned Senior Advocate has first pointed out that all petitioners had filed their Annual Returns before the last extended date for filing annual returns for F.Y. 2017-18 i.e. 07.02.2020. The marginal note app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist any COVID-19 circumstance at the time of issuance of the impugned notifications. The staff attendance at government and non-government offices stood regularised. Pre-existing office working restrictions were done away. Referring to the impugned time extension clause in Section 168-A of the Central Act and the State Act, it has been submitted that there did not exist any 'force majeure' circumstance. Referring to the order of the Supreme Court passed in Re: Cognizance for Extension of Limitation (Miscellaneous Application No. 408 of 2022 and connected matter) , the Supreme Court itself granted exemption/relaxation of limitation for a limited period 15.03.2020 to 28.02.2022 only. Thus, according to him, in absence of any ' force majeure' circumstance existing on 31.03.2023, the exercise of power by the Central Government and the State Government to extend the limitation to frame the adjudication order for F.Y. 2017-18 upto 31.12.2023, did not exist. The exercise of power is patently ultra vires the Act. 17. Here, he has also referred to Clause 5 of Circular dated 20.07.2021 to submit that the CBIC itself was cognizant of the order passed by the Supreme Court dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvise of the Council. Power to issue the time extension notifications being delegated to the Government, no blind or mute compliance may have been offered by the delegate to the opinion of the Council. Reference has been made to the impugned notifications and also to the resolution of the Law Committee considered by the Council, to submit that both are silent to the existence of force majeure circumstance relevant to the impugned notifications. 20. To clarify, he would submit, unless such circumstance was shown to exist on the date of issuance of time extension notifications and unless due application of mind had been made by the Central Government to that effect, inconceivable situation may arise where the Council may continue to resolve to extend the limitation of time to frame adjudication orders, indefinitely. The Central Government and the State Government may continue to offer blind compliance to such opinions and resolutions of the Council as may remain wholly contrary to the spirit of the Central and the State Act. Reliance has been placed on another decision of the Supreme Court in Union of India and Another Vs. Mohit Minerals Private Limited (2022) 10 SCC 700 to submit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issuance of the impugned notifications falls foul with the power vested with the Central Government and the State Government under Section 168A of the Central Act and the State Act. 22. Next, it has been submitted, limitation is a substantive right. It impacts the right of the tax-payers. Referring to the marginal note to TOLA, emphasis has been laid to the words special circumstance appearing in the marginal note. Thus, it has been emphasized, the power vested under Section 168A of the Act is not a general power to be exercised for completion of certain actions but an exceptional power vested in the delegate to be exercised, in special circumstances. 23. Referring to Eastern Coalfields Limited Vs. Sanjay Transport Agency Anr., (2009) 7 SCC 345 and Satyendra Kumar Mehra alias Satendera Kumar Mehra Vs. State of Jharkhand, (2018) 15 SCC 139 , it has been submitted, any doubt or ambiguity in the interpretation of the legislative clause may always be cleared by looking at the marginal note. Thus, it has been submitted, the impugned notifications are invalid as the power under Section 168A of the Act may only be exercised in special circumstances i.e. during the continuance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same. In the present case, that function has been circumscribed by the conditions enumerated under Section 168A of the Act. Therefore, unless the 'force majeure' circumstance (of continuance of COVID-19) was a fact in existence, the primary legislative function cannot be seen to be validly exercised by the delegate - either the Central Government or the State Government. Reliance has been placed on Independent Schools' Association, Chandigarh (Regd.) Ors. Vs. Union of India Ors., (2022) 14 SCC 387 to submit that a notification requiring substantive change to be made may neither be described as peripheral nor that power may be lightly exercised by the delegate. In the present case, the delegate having acted outside the scope of the delegation made, the impugned notifications are acts of excess. Essential legislative function was not and could not be delegated to the Central Government, or the State Government. 28. Referring to Lachmi Narain Ors. Vs. Union of India Ors., (1976) 2 SCC 953 , it has been elaborated, the express inbuilt legislative policy contained in a legislative act cannot be violated by the delegate by abrogating to itself plenary legislative function. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a piece of conditional legislation. The conditions on which delegate may act are specifically prescribed therein. There can be no doubt or imagination as to that. Thus, only when an 'action' for which time limit may have been prescribed, specified or notified, cannot be completed or complied within that time, only then, the Central Government and/or the State Government may act, to provide for time extension. Having laid that premise, he would proceed to submit, therefore, the recommendation of the Council must be seen to have considered and identified actions that were not complied or which could not be complied within the pre-existing prescription of time, that too for 'force majeure' circumstance existing. In the present facts, according to him, that consideration is completely lacking rather, it is absent. 33. Relying on the Hamdard Dawakhana (Wakf) Lal Kuan, Delhi Anr. Vs. Union of India Ors., AIR 1960 SC 554 , he would submit, there can be no doubt that Section 168-A of the Central Act and the State Act are pieces of conditional legislation. Thus, the occasion for the delegate to act is not only hinged to the recommendation of the Council but that such rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a physical impossibility. ( The Newbattle , 54 LJPD A 16). Further, referring to the said law lexicon, he would elaborate that the word complete' may only mean to finish; accomplish that which one starts out to do. (Black's Law Dictionary) . He has also referred to and relied on Article 356 (1) of the Constitution of India and the decision of the Supreme Court in S.R. Bommai v. Union of India, AIR 1994 SC 1918 , to submit that strict meaning of the word 'cannot' must arise to the words used by the legislature in Section 168A of the Central and the State Act. Thus, it has thus been stressed that the period of actual national lockdown - from 25.3.2020 to 31.5.2020, alone offered a circumstance when no action may have been completed or complied. Even then, it is a fact that during that period as well, notices came to be issued; proceedings were conducted and completed. Since, no action had been initiated at the relevant time, the legal basis to invoke the conditional legislation under Section 168A of the Central Act and the State Act - to obtain extension of limitation, did not exist. Unless a proceeding was first initiated, there may never arose a circumstance for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons advanced in these proceedings. He would submit, the impugned notifications are discriminatory. By virtue of the language used in Section 73 and Section 74 of the Central and the State Act, a clear demarcation exists between a registered person from whom tax may have remained to be collected, for reasons other than the fraud and those from whom due tax may remain to be collected for reason of fraud. Legislative wisdom remains, to treat the two categories of persons differently, inasmuch as lesser period of limitation of three years (from the last date of filing of return) exists for the first category of persons and a longer period of limitation of five years exists for persons who may be alleged to have committed fraud. By seeking to enlarge the limitation for the first category of persons without valid reasons, that legislative distinction has been destroyed. To that extent, the impugned notifications are wholly discriminatory, besides being in violation of the statutory scheme. Also for the same reason, he would contend that the impugned notifications are wholly arbitrary as there exists no valid or justifiable reason to destroy the pre-existing limitation that distinguishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utine way are contrary to the legislative intent and object expressed in the language of Section 168A of the Central Act and the State Act. That provision contemplates a limited intervention to be made by the Central or the State Government for reason of ' force majeure' circumstance having obstructed any action that was required to be completed or complied during the existence of continuance of ' force majeure' circumstance. Referring to UP Goods and Services Tax (Second Amendment) Act, 2020 and the statement on objections and reasons thereto, it has been submitted, Section 168-A of the State Act was incorporated only to overcome the difficulties faced by the tax-payers arising from lockdown declared due to COVID-19. Thus, the provision of Section 168-A may have been utilised only for that special circumstance, arising from that eventuality. 44. The non obstante clause appearing by way the opening words used in Section 168-A of the Central Act and the State Act must therefore be read strictly, to confine it to the object for which the said provision was enacted. Relying on Geeta Vs. State of U.P. Ors., (2010) 13 SCC 678, it has been asserted, the non obstante claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations are contrary to the express provisions of Section 168A of the Central Act and the State Act. Further, it has been submitted, the consideration of reasons in the 49th Meeting of the Council do not constitute or give rise to appreciation of any 'force majeure' circumstance. At best, the Council discussed the difficulties faced by some of the tax administrations . 49. Even in the agenda considered by the Council, the discussion exists only with respect to delays observed in issuance of show cause notice for F.Ys. 2017-18, 2018-19 and 2019-20, for reason of COVID-19 pandemic. It has been further noted, the Law Committee considered the delay in scrutiny and audit due to COVID-19 restrictions and had thus recommended extension of time. Merely because the revenue authorities may have faced certain difficulties in performing certain actions preceding issuance of adjudication notices, may never be described as an impossibility to complete and comply any action. 50. By way of another limb of the submission, Sri Mishra would submit, scrutiny and audit are independent activities. Adjudication proceedings do not hinge on and are not dependent on the same. Referring to Section 73( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Central Government or the State Government, especially because the reasons contained in the minutes of 48th Meeting of the Council refer to extraneous circumstance i.e. facts and measures falling outside twin test of force majeure circumstance existing and impossibility to perform due action, for that reason. 55. In his submission, by lapse of time especially after the second/Delta Wave of the pandemic COVID-19 got over, no ' force majeure' circumstance existed as may have prompted or persuaded the Central or the State Government to act on such recommendations. To the extent, the action to issue the impugned notifications is based on extraneous considerations, those would fall within the scope of judicial review. 56. Relying on D.C. Wadhwa others v. State of Bihar others, (1987) 1 SCC 378 , he would submit that power exercised by the executive was a colourable exercise to achieve a different object than that contemplated by Section 168A of the Central Act and the State Act. He has also placed reliance on Krishna Kumar Singh another v. State of Bihar others, (2017) 3 SCC 1, Collector (District Magistrate), Allahabad v. Raja Ram Jaiswal, AIR 1985 SC 1622, State of Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the petitioner in Writ-Tax No. 437 of 2023 has also adopted the submissions advanced by the other counsel of the petitioner. In addition, he has laid emphasis on the letter written by the Secretary to Chief Secretaries of all the States dated 22.03.2022 wherein it was informed, considering the overall improvement in the situation and preparedness of the government in dealing with the pandemic, the National Disaster Management Authority had decided that there was no need to invoke the provisions of the Disaster Management Act (to contain COVID-19), any further. Accordingly, it was provided, after expiry of the then existing order dated 25.2.2022, no further order may be issued by the Ministry of Home. 61. Second, referring to another letter written by the Union Home Secretary dated 25.2.2022, he has emphasised that by virtue of contents of paragraph-6(i), (vi), (vii) and (viii) thereof, all restrictions that had been created during the spread of pandemic COVID-19, stood withdrawn. Thus, public transport, inter-State movement and working of at all offices, (private and government), was restored without capacity restrictions. That step having been taken almost a year before issuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rently all taxation and other laws in one way and the Central Act in another. In the Central Act, a separate section 168A, was incorporated. 65. Referring to the Explanation thereto, it has been submitted, the provisions of Constitution of India, he would submit, the Central Act and the State Act would take effect from the date to be recommended by the Council. Thus, in his submission, Constitution has given primacy to the Council in matters of Central Act and the State Act. Referring to the Resolution recorded in the 49th Meeting of the Council, a requirement was felt to further extend the limitation for reason of reduced staff, staggered timing and exemption to certain categories of employees from attending offices. This occurrence though referable to the period prior to the date of issuance of the impugned notifications., yet, that had led to much delays in processing of Annual Returns involving procedures of scrutiny and audits. That task could only be attempted after the COVID restrictions were lifted. By that time, not only the Annual Returns for F.Y. 2017-18 had been filed upon expiry of the extended last date but the last date to file the Annual Returns for the F.Y. 2018-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the challenger i.e. the petitioners before this Court. Further, as to the grounds on which subordinate legislation may be struck down, amongst others, it may be either for lack of legislative competence or violation of fundamental rights or violation of another statute or failure to conform to the statute or repugnancy to other laws of the land or manifest arbitrariness. In considering the challenge raised to the subordinate legislation, the Court may consider if the impugned subordinate legislation is directly consistent with the mandatory provisions of the statute under which it had been issued. But where the inconsistency or non-conformity is not with respect to any specific provision but the object and scheme of the parent Act, the Court would proceed with caution before reaching the conclusion of invalidity. 69. Therefore, in his submission, the action by the Central Government and the State Government in issuing the impugned notifications is to be examined in the context of the Central Act and the State Act. That inconsistency may not be reached solely on the strength of the language of Section 168A of the Central Act and the State Act but by examining the context in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the Central Government and the State Government under that provision of law must be interpreted to include ancillary, incidental and necessary matters. It may not be confined to the direct actions as propounded by learned counsel for the petitioners. Therefore, the words in respect of though used in conjunction with the words actions do not restrict the exercise of power under Section 168A of the Central Act and the State Act to pending adjudication proceedings, only. The circumstances would have to be looked at holistically i.e. in the scheme of the Act in which the adjudication proceedings may arise. 73. Thus, in the first place the legislature and its delegate were conscious of the fact that arising from COVID-19 circumstances, resulting in reduced staff at government offices with restricted timings and exemption to certain class of employees - all directly attributable to COVID-19 circumstance, scrutiny and audit of annual returns had been impeded. That work of scrutiny and audit being the necessary preparatory work before initiating adjudication, it cannot be gainsaid that the revenue authorities are at fault in not carrying out the audit and scrutiny during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e acted mechanically. 75. Besides the discussion offered to the circumstances and the force majeure circumstance and their consequences resulting in non-initiation/completion of the preliminary steps that were required to be undertaken before any valid adjudication may have arisen i.e. steps involving scrutiny and audit, both, the Council as well as the Central Government were mindful of the fact that such circumstance may only affect proceedings that may arise under Section 73 of the Act not involving allegations of fraud etc. Thus, contrary to the request of certain tax administrations to extend the time limits to initiate proceedings under Section 74 of the Central Act, the recommendation made by the Council and the action taken by the Central Government were to deny that request. Extension of limitation was granted only to actions contemplated in Section 73 of the Act i.e. proceedings arising from filing of regular Annual Returns and proceedings as may arise upon due scrutiny and audit of such returns. Since, in the opinion of the Council as found approval of the Central Government, only those proceedings had been obstructed for reasons beyond the control of the revenue authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sharma and Others Vs. Union of India and Others (2023) 3 SCC 1 to rely on the principle that a judicial review being claimed may not extend to test the fairness of the decision but only to the manner in which it may have been taken. Decisions that arise on consideration of numerous factors may never be tested on the merits of the decision made. 77. Last, it has been submitted that the impugned notifications are not original. Those are notifications to modify the principal notification being Notification Nos. 35/2020 dated 03.4.2020 and 445 dated 11.5.2020. Only because the time extension granted by the original notifications required revision/enhancement, the impugned notifications came to be issued. The petitioners having failed to raise any challenge to the original notifications, they may never be heard to challenge the modification notifications. 78. Sri Nimai Das learned Additional Chief Standing Counsel appearing for the State Government has also relied on the decision in Vivek Narayan (supra) . Then referring to the words of the legislature due to force majeure he has laid great emphasis that the legislative words do not indicate or contain a legislative policy limiting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring to the period of disruption recognised by the Supreme Court being 15.3.2020-28.2.2022 which is 01 year 11 months and 15 days, it has been submitted, if that period is to be excluded from the period of limitation that was otherwise available to the revenue authorities to pass adjudication orders for the F.Y. 2017-18 and that period were to be added to the normal period of limitation that existed from the date 07.2.2020 (last date of filing of return) for F.Y. 2017-18, the time limitation to make adjudication order for the F.Y. 2017-18 would exist practically upto 22.1.2025. The impugned notifications only seek to extend that limitation upto 31.12.2023 i.e. the extended period of limitation is short by one year than may otherwise be availed on the principle recognised by the Supreme Court. 82. Sri Ankur Agarwal learned Standing Counsel has laid great emphasis on the decision of the Supreme Court in Vivek Narayan (supra) to submit that the scope of judicial review has to be kept confined within the well recognised parameters of law. Neither, the Courts may interfere in policy decisions generally nor the Courts may seek to venture to sit in judgment over economic policy matters. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling of Annual Return for FY 2017-18 for the State of U.P., to 07.02.2020. Then, Section 73 of the Central Act and the State Act (1), (2) (9) (10) reads as below: Section 73 - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilfulmisstatement or suppression of facts (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. (2) The proper officer shall issue the notice under sub-section (1) at least three mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of commencement of this Act. Explanation-For the purposes of this section, the expression force majeure means a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise affecting the implementation of any of the provisions of this Act. 87. The final order passed by the Supreme Court in Re: Cognizance for Extension of Limitation (supra) (paragraph nos.1, 2 5 and 6) reads as below. (1). In March, 2020, this Court took Suo Motu cognizance of the difficulties that might be faced by the litigants in filing petitions/ applications/suits/ appeals/all other quasi proceedings within the period of limitation prescribed under the general law of limitation or under any special laws (both Central and/or State) due to the outbreak of the COVID-19 pandemic. (2) On 23.03.2020, this Court directed extension of the period of limitation in all proceedings before Courts/Tribunals including this Court w.e.f. 15.03.2020 till further orders. On 08.03.2021, the order dated 23.03.2020 was brought to an end, permitting the relaxation of period of limitation between 15.03.2020 and 14.03.2021. While doing so, it was made clear that the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 35 of 2020 dated 03.04.2020 by the Central Government and a parallel/ pari materia Notification No. 445 dated 11.05.2020 issued by the State Government. For ready reference, we extract the relevant portion of the Notification No. 35 of 2020. It reads as below : Notification-GST-Central GST (CGST) MINISTRY OF FINANCY (Department of Revenue) (CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS) NOTIFICATION No. 35/2020-Central Tax New Delhi, the 3rd April, 2020 G.S.R. 235(E). In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with section 20 of the integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of Union Territory Goods and Services Tax Act, 2017 (14 of 2017), in view of the spread of pandemic COVID-19 across many countries of the world including India, the Government, on the recommendations of the Council, hereby notifies, as under,- (i) where, any time limit for completion or compliance of any action, by any authority or by any person, has been specified in, or prescribed or notified under the said Act, which falls during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vid-19 pandemic. A request was made to consider extension of timelines in respect of proceedings under: i. Section 73 and 74 ii. Section 54 and 55 2.2 The issue was deliberated by the Law Committee in its meeting held on 11.04.2022 and 07.05.2022. The Law Committee observed that centre as well as state governments were working with reduced staff, along with staggered timings and exemption to certain categories of employees from attending offices, from time to time during COVID period. Further, it was a conscious policy decision not to do enforcement actions in the initial period of implementation of GST law, thereby no action for scrutiny, audit etc. could be undertaken during initial period of GST implementation. Since the due date of filing Annual Return for FY 2017-18 was 5th/7th February, 2020, based on which limitations for demand under the Act are linked, and since the onset of COVID happened immediately after that, thereby, audit and scrutiny for FY 2017-18 were impeded due to various restrictions during COVID period. 2.3 The Law Committee, accordingly, recommended that limitation under section 73 for FY 2017-18 for issuance of order in respect of demand linked with due date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, Sub-section (i), vide number G.S.R. 235(E), dated the 3rd April, 2020 and No. 14/2021-Central Tax, dated the 1st May, 2021, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 310(E), dated the 1st May, 2021, the Government, on the recommendations of the Council, hereby,- (i) extends the time limit specified under sub-section (10) of section 73 for issuance of order under subsection (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, in respect of a tax period for the financial year 2017-18, up to the 30th day of September, 2023; (ii) excludes the period from the 1st day of March, 2020 to the 28th day of February, 2022 for computation of period of limitation under sub-section (10) of section 73 of the said Act for issuance of order under subsection (9) of section 73 of the said Act, for recovery of erroneous refund; (iii) excludes the period from the 1st day of March, 2020 to the 28th day of February, 2022 for computation of period of limitation for filing refund application under section 54 or section 55 of the said Act. 2. This notification shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and is not applicable to any other proceedings under Central Act and the State Act. 94. The fourth action witnessed upon enforcement of Section 168A and the one which is impugned in these proceedings arose pursuant to the 49th Meeting of the Council held on 29.02.2023. In that at agenda item 4(vii), the following discussion emerged: 5.7 Principal Commissioner: (GSTPW) informed that there have been requests from tax administrations for further extension of time limit under Section 73 of CGST Act for issuance of Show Cause Notices (SCN) and Orders for financial year 2017-18, 2018-19 and 2019-20, considering that the scrutiny and audit were delayed because of Covid-19 pandemic. He informed that the issue was discussed by the Law Committee and it was observed that earlier, such extension was given for the F.Y. 2017-18. It was felt by the Law Committee that while there may be a need to provide additional time to the officers to issue notices and pass orders for FY 2017-18, 2018-19 and 2019-20 considering the delay in scrutiny, assessment and audit work due to COVID-19 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2017) (hereinafter referred to as the said Act) read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of the Union territory Goods and Services Tax Act, 2017 (14 of 2017) and in partial modification of the notifications of the Government of India, Ministry of Finance (Department of Revenue), No. 35/2020-Central Tax, dated the 3rd April, 2020 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 235(E), dated the 3rd April, 2020 and No. 14/2021-Central Tax, dated the 1st May, 2021 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (1), vide number G.S.R. 310(E), dated the 1st May, 2021 and No. 13/2022- Central Tax, dated the 5th July, 2022, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 516(E), dated the 5th July, 2022, the Government, on the recommendations of the Council, hereby, extends the time limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 100. Tested on the above principle, as a fact, the recommendation of the Council to issue the impugned notifications - to extend the time limit, exist. Also, the occurrence of the force majeure circumstance i.e. epidemic COVID-19 is undisputed. Therefore, it is required to be considered is whether: (i) that power was exercised in respect of actions which could not be completed or complied and, (ii) due to force majeure . 101. The action with respect to which the challenge has arisen is issuance of adjudication notices under Section 73(2) of the Central Act and the State Act and passing of orders under Section 73(9) of the Central Act and the State Act. Clearly, for both purposes, limitation of time prescription exists inasmuch as adjudication order is required to be passed within three years from the last date of filing of an Annual Return. Also, with respect to issuance of show cause notice, Section 73(2) requires such notice to be issued at least three months prior to expiry of time limitation to pass the adjudication order. Therefore, by way of a special power vested under Section 168A of the Central Act and the State Act, the Central Government and the State Government wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t took cognizance of that occurrence and relaxed the period of limitation (in all), beginning 15.03.2020 to 28.02.2022. Besides, consideration of the same also exists in the minutes of meeting of the Council at its 47th meeting dated 28-29.06.2022 and at its 49th meeting dated 18.02.2023. The agenda item at those meeting has also been relied by all learned counsel. In the minutes of the 47th meeting of the Council, it had been clearly noted that the scrutiny and audit of Annual Returns for F.Ys. 2017-18, 2018-19 and 2019-20 was delayed because of COVID-19 pandemic . Then, those minutes further record considering the delay in scrutiny, assessment and audit work due to COVID-19 restrictions , it was desired to avoid bunching of last dates for those three Financial Years. On that consideration, the Law Committee recommended to the Council for appropriate time extensions for the F.Ys. 2017-18, 2018-19 and 2019-20. The Law Committee further took note of the concern expressed that such extension may not be a tax-friendly measure and may work against tax payers. The Council further took note of the fact that by virtue of earlier extensions granted, time stipulation had been considerably e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents. 110. Once we have held that issuance of the time extension application was a legislative function and there existed material and due deliberation/ consideration over/of to that material, before the legislative function was performed, the first condition of existence of circumstances for exercise of the said power described as conditional legislation, stood fulfilled. Therefore, the ratio of the decision of the Supreme Court in Mohit Minerals Private Limited (supra) is also of no avail. By way of principle it may not be doubted that the recommendations of the Council remained persuasive. The Central Government and the State Government were not duty bound to conform thereto. However, in absence of any fact shown to exist, the Central Government and the State Government have exercised their conditional legislative function in accordance with law. No palpable illegality or arbitrariness has been shown to exist as may warrant any deeper examination by the Court. 111. Next, we have to examine, if that consideration was enough and if it satisfied any further test laid down in Section 168A of the Central Act and the State Act. Here, we are unable to accept the submission advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted for the period 15.03.2020 to 28.02.2022, at the same time, we must remember that judicial notice was taken of the disabling events triggered by the spread of the pandemic COVID-19, by the highest Court of the land. That judicial recognition of that fact, was commonly known to all, itself is irrebuttable evidence of both - the extent of disablement and the length of time for which such disablement continued to exist, unabated. In face of that recognition and established truth, no use or purpose may be served in offering any deliberation. Therefore, we conclude, the revenue authorities were visited with a circumstance that was not of their making. It was not a mere difficulty of the usual kind. It was not a wholly temporary or transient impairment caused to their functioning. Beginning 15.03.2020, it had disabled the working of the revenue authorities, over a long period, occasioned by a force majeure circumstance.. 115. The decision in S. Kasi (supra) is of no application to the present facts in view of distinction arising on the own strength of language of Section 168A of the Central Act and the State Act. Similarly the decision of the Jharkhand High Court in M/s Rungta Mines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and seek his explanation thereto. (2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard. (3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74. 118. Again, under Section 65(7) of the Act, where an audit is conducted to tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised may result in action under Section 73 of the Act. For ready reference, Section 65(7) reads as below: Audit by tax authorities. 65.(1) (7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scrutiny and audit. Once that obstruction had been caused and time lost to COVID-19, the legal and factual impossibility to conduct and conclude adjudication proceedings within the normal period of limitation of three years from the last date of filing of Annual Return, arose by way of a necessary consequence. 123. In the context of legislative action taken, upon a holistic consideration of the representations made by different tax administrations, the opinion of the Law Committee as also the own appraisal made by the Council, all of which is duly reflected in the agenda and the discussion relevant to the 47th and 49th meeting of the Council, the true test laid down in Dwarika Prasad Sahu (supra) is found inapplicable. That was a case of detention under Maintenance of Internal Security Act, 1971. It was the administrative order of detention that was in issue. Therefore, the test laid down in that case is wholly inapplicable and foreign to the challenge laid to legislative action, in the present case. In face of the discussion noted above, the decision in D.C. Wadhwa (supra), Krishna Kumar Singh (supra), Raja Ram Jaiswal (supra), Gurdial Singh (supra) and Kalabharati Advertising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 168A of the Act (as discussed above), there is equally convincing evidence available in the use of the words in respect of . The legislature clearly did not intend to provide for additional limitation only to complete actions that had been already undertaken. The words in respect of are clearly used to enlarge the scope of exercise of the conditional legislation function. Thus, anything directly linked to the performance of action for which time limitation may have been specified, prescribed or notified under the Central Act and the State Act and which action is perceived cannot be completed or complied , the delegated/conditional legislation in the shape of Section 168A, may arise. 127. As discussed above, scrutiny and audit of returns was directly linked to framing of adjudication orders. To the extent that scrutiny and audit work was obstructed directly for reason of spread of the pandemic COVID-19, as was judicially noted in the order passed by the Supreme Court in Re: Cognizance for extension of limitation (supra) for the duration 15 March 2020 to 28 February 2022, it is not for this Court to reach another conclusion in that regard. Thus, the decision of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (h) of the Constitution of India is equally mis-placed. In absence of any fact circumstance or legal compulsion shown to exist, no defect is found in the conduct of the Central Government and the State Government in having acted on the recommendation of the Council. In the context of the conditional legislation that Section 168A is, in our opinion the conditions were wholly fulfilled. Therefore, no benefit may be drawn on the strength of the decisions of the Supreme Court in Hamdard Dawakhana (Wakf) Lal Kuan, Delhi (supra) and K. Sabanayagam (supra) . 132. We also are not convinced that there was any statutory mandate to provide for only short extensions of time or limited extensions of times. Suffice to note, if the COVID-19 pandemic had continued beyond the third wave (as experienced in our country), that argument would never arise. To the extent that argument arises on hindsight wisdom, and past actions were dictated by nature as were beyond the control of human beings, it would be erroneous to infer a legislative intent based on the experience gained on the strength of initial remedial actions taken by the executive and the legislative bodies, in response to the spread of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould also remain outside the scope of judicial review. Suffice to note, no excessive extension of time is seen to have been granted. If the period beginning 15th March 2020 to 28th February 2022 were to be excluded, a similar result would have arisen in terms of limitation extension. However we make it clear that the above has been noted only to deal with submission of colourable exercise power and not by way of independent reason to uphold the exercise of legislative power. 135. The reliance placed on the marginal note appended to Section 168A is misconceived. The language of that section being clear and free from doubt or ambiguity, there does not exist the necessary pre-condition to look at the marginal note to interpret the true meaning of words used in the said section. To read the marginal note in face of clear language of Section 168A of the Central Act and the State Act, is impermissible. The decision of the Supreme Court in Eastern Coalfields Limited (supra) and Satyendra Kumar Mehra alias Satendera Kumar Mehra (supra) are therefore in-apposite. Geeta (supra) is also not applicable to the present facts inasmuch as the language of Section 168A being unequivocally clear, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. (emphasis supplied) 18. . 19. In Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223] a Constitution Bench of this Court reiterated: (SCC pp. 251-52, para 47) 47. Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably, intra vires the power granted, and on relevant consideration of material facts. All his decisions, whether characterised as legislative or administrative or quasi-judicial, must be in harmony with the Constitution and other laws of the land. They must be reasonably related to the purposes of the enabling legislation . See Leila Mourning v. Family Publications Service [411 US 356 : 36 L Ed 2d 318 (1973)] . If they are manifestly unjust or oppressive or outra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been held that when the Government forms its policy, it is based on a number of circumstances and it is also based on expert's opinion, which must not be interfered with, except on the ground of palpable arbitrariness. It is more than settled that the Court gives a large leeway to the executive and the legislature in matters of economic policy. A reference in this respect could be made to the judgments of this Court in P.T.R. Exports (Madras) (P) Ltd. v. Union of India [P.T.R. Exports (Madras) (P) Ltd. v. Union of India, (1996) 5 SCC 268] and Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd. [Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd., (2011) 1 SCC 640] 252. It has been held in Metropolis Theater Co. [Metropolis Theater Co. v. City of Chicago, 1913 SCC OnLine US SC 123 : 57 L Ed 730 : 228 US 61 (1913)] that if the action of the Government has a basis with the objectives to be achieved, it cannot be declared as palpably arbitrary. It has been held that, to be able to find fault with a law is not to demonstrate its invalidity. It has been held that the result of the act may seem unjust and oppressive, yet be free from judicial interference. The problems of Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not. It has been held that it would be wise for the Court not to hazard an opinion where even economists may differ. It has been held that while examining the constitutional validity of such a legislation, the Court must be resilient, not rigid, forward looking, not static, liberal, not verbal . 258. Therefore, while adjudging the illegality of the impugned notification, we would have to examine on the basis as to whether the objectives for which it was enacted has nexus with the decision taken or not. If the impugned notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships would not be a ground to hold the impugned notification to be bad in law. 138. Seen in that light the decisions cited by learned counsel for the petitioners are found to be distinguished. The writ petitions challenging the issuance of the impugned notifications must fail. Hearing of all cases where adjudication proceedings are pending may recommence and be concluded, after excluding the duration of stay of the extended li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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