The Gauhati High Court held that the Notification No.56/2023-CT was colourable legislation and was passed without GST council recommendations.
The bench of Justice Devashis Baruah has relied on the decision of Supreme Court in the case of Mohit Minerals Pvt. Ltd. in which it was held that when the Government is exercising power to notify secondary legislations to give effect to the uniform taxation system, the recommendations are binding. Be that as it may, irrespective of the fact whether the recommendations are binding or not can it be said that without recommendations, the power under Section 168A could be exercised. The answer has to be in the negative.
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The bench stated that the Central Government knew that there was no recommendation from the GST Council and this aspect is clearly admitted. However, in the Notification No.56/2023-CT, the Central Government for reasons best known mentioned that “on the recommendations of the Council” which on the face of it shows that the exercise of power by the Central Government insofar as the Notification No.56/2023-CT is concerned is a colourable exercise of power for which the said Notification No.56/2023- CT is a colourable legislation.
The bench further remarked that the recommendation to be made by the GST Council have also to be based upon the existence of force majeure conditions.
In the 49th Meeting of the GST Council, it was clearly recorded that there shall be no further extension beyond the three months in the interest of the tax payers.
The Notification No.56/2023-CT was issued without the recommendation and that natural corollary thereof is that the GST Council had no occasion to consider existence of force majeure inasmuch as the same was never placed before the GST Council before issuance of the same.
Therefore, the Notification No.56/2023-CT if construed from that angle also would be a notification issued without the force majeure condition being not considered in accordance with law.
Background
The Petitioners/assessees challenged their respective Order-in-Original passed under Section 73(9) of the Central Goods and Service Tax Act, 2017 as well as Assam Goods and Services Tax Act, 2017 on the ground that the Notification No.9/2023-CT dated 31.03.2023 and the Notification No.56/2023-CT dated 28.12.2023 by which the period for passing of the order under Section 73(10) of the Central Act was extended in exercise of the powers under Section 168A of the Central Act was ultra vires the Central Act. The Petitioners have assailed the imposition under the State Act on the ground that there is no Notification issued under Section 168A of the State Act extending the period for passing order under Section 73(10) of the State Act.
The Notification No.09/2023-CT and Notification No.56/2023-CT are challenged on the grounds that the condition precedent for issuance of the Notifications in exercise of powers under Section 168A of the Central Act were not fulfilled.
The Notification No.9/2023-CT is challenged on the ground that in absence of force majeure, the Government could not have exercised the power under Section 168A of the Central Act. In respect to the Notification No.56/2023-CT, the challenge is on the ground that the twin conditions for issuance of the Notification i.e. existence of a recommendation of the Goods and Service Tax Council (GST Council) and due to force majeure were absent.
Relevant Provisions
Article 246A of the Constitution provides the Parliament and the State Legislature the concurrent power to legislate on Goods and Service Tax. Article 246A starts with a non-obstinate clause thereby overriding Article 246 and Article 254 of the Constitution.
Article 246A does not provide a repugnancy clause like Article 254, which stipulates that the law made by the Parliament on the subject in the concurrent list shall prevail over conflicting laws made by the State Legislature.
Article 246A are available both to the Parliament and the State Legislature, save and except for the exclusive power of the Parliament to enact GST legislation where the supply of goods or services take place in the course of inter-State trade or commerce.
As Article 246A vests upon the Parliament and the State Legislatures with the unique simultaneous law making power on Goods and Service Tax, the Goods and Service Tax Council gains significance. To understand the scope and ambit of the Goods and Service Tax Council, it is relevant to take note of Article 279A of the Constitution.
The GST Council have been given a Constitutional status. What the GST Council would be comprised of have been stipulated in Sub-Article (2) and (3) of Article 279A. Sub-Article (4) of Article 279A is of paramount importance for the purpose of the instant proceedings taking into account that the said Sub- Article stipulates in what fields the GST Council shall make recommendation to the Union and the States.
Section 168A of the GST Act starts with a non-obstinate clause, by empowering the Government to issue a notification thereby extending the time limit specified in or prescribed or notified in the Act in respect of actions which cannot be completed or complied with due to force majeure.
Section 44 of the Central Act stipulates the requirement of filing of the Annual Return for every financial year in FORM GSTR-9 on or before the 31st day of December following the end of such financial year, through the common portal, either directly or through a facilitation centre notified by the Commission.
For the financial year 2017-18 the annual return was therefore required to be filed on or before 31st of December, 2018. By a Notification No.8/2019-CT dated 14.11.2019, the Central Government by exercising the powers under Section 179 of the Central Act, extended the period for filing the annual return to 31st December, 2019.
Arguments
The petitioner contended that there is no recommendation from the GST Council prior to issuance of the Notification No.56/2023-CT, the said notification is ultra vires the provisions of Section 168A of the Central Act. In spite of having no recommendations, the Central Government for reasons other than bona fide, have resorted to falsehood by mentioning in the Notification No.56/2023-CT that there was a recommendation and as such, the manner in which the power has been exercised by the Central Government while issuing the impugned Notification No.56/2023-CT amounts to colorable exercise of power.
The petitioners contended that in respect to the challenge to the Notification No.9/2023-CT, the question of there being a force majeure does not arise inasmuch as the COVID pandemic was not affecting the working of the administration in the year 2022 and thereupon there is already an extension granted earlier and as such, unless the State Government or the Central Government would have proved by way of affidavit or otherwise giving material particulars that they were not able to perform on account of force majeure, the condition precedent that it is only when there exists force majeure is not fulfilled and as such, the Notification No.9/2023-CT is also required to be interfered with.
The department contended that in view of the coming into effect of the Finance Act, 2024, no cause of action in respect to the instant writ petition survive inasmuch as the Petitioners herein would be entitled to the various reliefs in terms with the amendments so brought in to the Central Act. Mr. S. C. Keyal, the learned Standing counsel fairly submitted that in respect to the Notification No.56/2023-CT, there was no recommendations made by the GST Council for issuance of the said notification and to his knowledge there is also no ratification by the GST Council till date.
In addition to that, as regards the force majeure, the learned counsel submitted that during this period, on account of the COVID-19 pandemic, there were various delays on account of completing certain assessment, audit etc. and under such circumstances, the existence of force majeure as defined in the Explanations to Section 168A was there.
The Finance and Taxation Department of the Government of Assam contended that the State Government have issued a notification on 06.09.2024 by exercising the powers under Section 168A of the State Act which is pari materia in content to the notification No.9/2023-CT. The notification has been issued with the recommendation of the GST taking into account that the GST had granted the recommendation in its
49th Meeting. The learned Standing counsel however fairly submitted that there is no other notification issued by the Government of Assam which is pari materia to the Notification No.56/2023-CT.
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Conclusion
The court while allowing the petition held that the Orders which have been passed under Section 73(9) both under the Central Act as well as State Act are beyond the time period prescribed under Section 73(10) of both the Central Act or the State Act for which the same are liable to be interfered with as being passed without jurisdiction.
Case Title: M/S. Barkataki Print And Media Services & Ors. Vs. The Union Of India And Ors
Case No.: Case No. : WP(C)/3585/2024
Date: 19/09/2024
Counsel For Petitioner: Nitu Hawelia
Counsel For Respondent: S. C. Keyal
