The Patna High Court has upheld the notification for extension for issuance of Show Cause Notice (SCN) under section 73 of GST Act. However, the assessment orders were quashed citing the lack of notice of personal hearing.
The bench of Chief Justice K. Vinod Chandran and Justice Partha Sarthy has observed that scrutiny of returns is also a procedure which can be adopted by the Assessing Officer and any discrepancy noticed has to be informed to the assessee. If the assessee’s explanation is found satisfactory, no further action is to be taken and if it is not satisfactory or an explanation is not submitted, then further proceeding has to be taken under Sections 65, 66, 67, 73 or 74.
The writ petitions challenging assessment orders of 2017-18, 2018-19 and 2019-20, primarily on the ground of limitation. The petitioners/assessee were aggrieved with the 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; brought in, invoking Section 168A of the respective enactments.
The due date for furnishing of annual returns for a financial year, as per both the GST enactments, is 31st December of that financial year, as per Section 44.
The assessment orders challenged in each of the writ petitions, for the respective assessment years, were passed on the basis of the extension; beyond the period of three years from the 31st of December of the subject year; which is the limitation provided under Section 73(10).
The petitioners contended that the notifications issued under Section 168A of the GST Act was after the pandemic period and in that circumstance, there could not have been any extension of limitation.
The different petitioners in the writ petitions have raised multiple grounds for challenging the orders passed; primarily on limitation; then on the grounds of a notice having not been issued under Section 61 of the GST Act read with Rule 99, as also violation of the principles of natural justice; which allegation is levelled for reason of no personal hearing having been afforded as mandated under Section 75(4).
The court noted that If the due date as provided in Section 44 of the
GST Act was applicable, then the limitation under Section 73(10) of the GST Act, for making an order would expire respectively on (i) 31.12.2021 (2017-18), (ii) 31.12.2022 (2018- 19) and (iii) 31.12.2023 (2019-20). The pandemic was first visible towards the end of the year 2019 and the situation escalated over the next few months and in India, a complete lock down was declared on 25.03.2020.
The petitioner contended that Notification Nos. 13/2022-Central Tax, 9/2023-Central Tax & 56/2023-Central Tax which extended the dates for issuing orders under Section 73(10) of the GST Act. The notifications which respectively came on 05.07.2022, 31.03.2023 and 20.12.2023, under Section 168A of the CGST Act were not sustainable and tenable since the force majeure condition of the pandemic situation has not been satisfied.
The court noted that the complete nation- wide lock down though lasted only till 31st May-2020, the situation continued to be grim; seriously affecting and jeopardizing every human activity, not only in India but all over the world. Life came to a stand-still and the statutory compliances were seriously hampered and the statutory proceedings and processes stood suspended for multifarious reasons; of affliction with COVID-19 pandemic, limited lock down of local areas, restricted attendance and reduced foot-falls in government offices and so on and so forth.
The court noted that Section 168A of the GST Act was specifically brought into the statute book by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, replaced with the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 with effect from 31.03.2020, which was specifically in view of the spread of Pandemic COVID-19 across the world.
The court noted that the non-obstante provision in Section 168A of the GST Act empowers the Government, on the recommendation of the Council to extend the time limit specified in or prescribed and notified under the GST Act, in respect of actions which could not be completed and complied with due to force majure and by sub-section (2) empowers such notifications to have retrospective effect. The explanation defines force majure; which no doubt includes the COVID-19 pandemic situation. The power so conferred cannot also be confined to be exercised, when a force majure situation is existing.
The court 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.
Case Details
Case Title: M/s Barhonia Engicon Private Limited Versus State of Bihar
Case No.: Civil Writ Jurisdiction Case No.4180 of 2024
Date: 27-11-2024
Counsel For Petitioner: D.V. Pathy, Dr. Avinash Poddar, Sri. Bijoy Kumar Gupta and Sri. Aman Raza
Counsel For Respondent: P.K. Shahi, learned Advocate General for the State and Dr. K.N. Singh, learned Additional Solicitor General for the Union of India
