The Telangana High Court has held that the existence of GST Council recommendation is not a precondition for issuing Notification under Section 168A of the GST Act.
The bench of Justice Sujoy Paul and Justice G. Radharani has held that the notification issued by the Central Board Of Indirect Taxes and Customs (CBIC) extends Show Cause Notice deadlines for tax recovery.
The bench stated that the order of the Supreme Court dated 10.01.2022 passed in suo motu Writ Petition (Civil) No.3 of 2020, is indeed, applicable to the proceeding under the GST Act. Thus, the question of validity of notifications pales into insignificance. Since the period between 15.03.2020 to 28.02.2022 stood excluded for the purpose of counting limitation by an order which became law of the land, the remaining argument relating to validity of notifications became academic in nature. After excluding limitation from 15.03.2020 to 28.02.2022, it cannot be said that action of the department in proceeding against the petitioners/assessees is barred by limitation.
The batch of writ petitions were filed questioning the 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. The pari materia corresponding notification Nos.118/2023, dated 25.08.2023 and 170/2023, dated 17.12.2023 issued by State of Telangana are also subject matter of challenge.
These notifications are admittedly issued in purported exercise of power under Section 168A of The Central Goods and Services Tax Act, 2017.
The extension was made vide Notification No.13/2022-Central Tax, dated 05.07.2022, wherein time limit under Section 73(10) of the CGST Act for F.Y. 2017-18 was extended upto 30.09.2023 by excluding the intervening period between 01.03.2020 to 20.08.2022 for recovery of erroneous refund cases under Section 73(10) and refund claims under Section 54.
The extension was issued on 05.07.2022 allowing the Department to issue notices on or before 30.09.2023. Assuming that the extension was valid and is in consonance with Section 168A, there was no requirement for any further extension. Thus, the Department is using the COVID-19 pandemic as an excuse and reason to undo their failure of not completing assessments and raising demands under Section 73 within stipulated time.
Heavy reliance is placed on CBIC Circular No.157/13/2021- GST, dated 20.07.2021, to canvass the point that the understanding of respondent-Department is that the orders passed by Supreme Court in suo motu jurisdiction extending limitation period are not applicable to the Department. Similarly, CBIC instructions No. 2/2021, dated 22.09.2021, expects strict adherence to the timeline provided under Section 73 of the GST Act and does not take excuse of difficulties arising out of COVID-19 pandemic.
The petitioner contended that in the era of technological advancement, exercise of issuance of notice, filing or reply, hearing and passing orders is being done through virtual/electronic mode. CBIC has mandated that the hearing be conducted through virtual mode. Thus, even otherwise, there existed no practical difficulty for Revenue to complete their exercise within the stipulated time.
The petitioner contended that Section 168A of the GST Act provides that extension notification can be issued on the recommendation of the GST Council. So far as notification No. 56/2023 is concerned, there was no prior notification of GST Council.
The counter of the Department filed in the cases shows that the notification No. 56/2023 was issued on the basis of a decision taken by the GST Implementation Committee/Law Committee. Thus the decision of the Implementation/Law Committee was ratified by GST Council after six months from the date of issuance of notification No. 56/2023.
The meaning of words ‘recommendation’ and ‘ratification’ were highlighted to show the difference between the two. The ‘recommendation’ is always prior in time which forms the basis for taking a decision, whereas, ‘ratification’ is a subsequent exercise for a decision which has already been taken. In view of the statutory mandate ingrained in Section 168A of the GST Act, subsequent ‘ratification’ cannot satisfy the requirement of statute i.e., ‘on the recommendation of the GST Council’.
The department contended that while reading Section 168A of the GST Act, it is urged that it begins with a non-obstante/overriding clause notification can be given retrospective effect. It gives power to extend limitation relating to any provision under the GST Act.
The department urged that before insertion of Section 168A in the GST Act, Section 172 was the only enabling provision to remove the difficulty. This provision also could be invoked only on the recommendation of the Council. Section 168A was introduced during COVID-19 Pandemic to take care of ‘special circumstances’. Thus, language of this provision and each word used must be given full meaning. It is urged that first principle of interpretation of statute is that each word must be considered in its context and if language is plain and unambiguous, it has to be implemented irrespective of consequences. The words ‘in respect of’ used in Section 168A were highlighted to submit that it is not necessary to confine the extension of limitation during the currency of COVID-19 Pandemic.
The court held that 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 the Government on such a recommendation in the shape of notification will certainly have a serious impact on taxpayers.
The court stated that Section 73(10) prescribes a 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 the time limit issued under Section 168A can impact the taxpayer for the purpose of conclusion of proceedings as per conjoint reading of Section 73(10) and 75(10) of the GST Act. Therefore, the word ‘may’ does not make the provision i.e., Section 168A as directory.
The court disposed of the writ petitions by reserving liberty to the petitioners to avail the remedy of statutory appeal.
Case Details
Case Title: M/s.Brunda Infra Pvt. Limited and Others. vs. The Additional Commissioner of Central Tax
Case No.: Writ Petition Nos.1154 Of 2024 & Batch
Date: 02-01-2025
Counsel For Appellant: Sri S.Ravi, learned Senior Counsel, assisted by Sri P.Venkata Prasad Sri V.Bhaskar Reddy, learned Senior Counsel, assisted by Sri V.Siddarth Reddy; Sri V.Sridharan, learned Senior Counsel, assisted by Sri Narendra Dave; Sri Singam Srinivasa Rao; Sri A.V.A. Siva Karthikeya; Sri Nishant Mishra, learned counsel assisted by Sri Omer Farooq; Sri SRR Viswanath, learned counsel assisted by Ms. S.N. Sreedevi; Sri P. Govind Reddy; Sri M. Ramachandra Murthy; Sri Karthik Ramana Puttamreddy; Dr. Avinash Poddar
Counsel For Respondent: Sri B.Narasimha Sharma, learned Additional Solicitor General of India, assisted by Sri Gadi Praveen Kumar, learned Deputy Solicitor General of India; Sri Dominic Fernandes, learned Senior Standing Counsel for CBIC, assisted by Ms.Pravalika Goud Sri R.Sushanth Reddy, learned Standing Counsel for CBIC
