The Hon’ble Gauhati High Court in the present case addressed the validity of Notification No. 56/2023-CT dated 28.11.2023 (“Notification No. 56/2023”) issued under Section 168A of the Central Goods and Services Tax Act, 2017 (“CGST Act”). The Hon’ble High Court held that the Notification No. 56/2023 extending the time limits prescribed under Section 73(10) of the CGST Act for passing orders under Section 73(9) of the CGST Act was ultra vires in the absence of recommendation by the GST Council, which was a pre-requisite under Section 168A of the Act and also in the absence of force majeure.
The Hon’ble High Court held that the Notification No. 56/2023 is ultra vires provisions of Section 168A of the CGST Act and not legally sustainable, while making the following observations:
The Hon’ble Court held that a recommendation from the GST Council is essential for any action taken under Section 168A of the CGST Act. It highlighted that wherever the provisions of the CGST Act stipulates that an act is required to be done on the recommendation of the GST Council, the act can be done only when there is a recommendation. The 49th GST Council Meeting recommended that the time limit prescribed under Section 73(10) of the CGST Act to issue orders for FY 2017–2018, 2018–2019 and 2019-20 may be extended by three months only. Accordingly, the time limit for FY 2018-19 and 2019-20 was extended to 31.03.2024 and 30.06.2024, respectively. This time limit was further extended to 30.04.2024 and 31.08.2024, respectively, by issuing the challenged Notification No. 56/2023. The Notification No. 56/2023 mentioned that the extension was ‘on recommendation by the GST Council’, which was not so.
The Hon’ble Court held the fact that recommendations of the GST Council are not binding cannot be construed to mean that the government can act without a GST Council recommendation if the CGST Act or the SGST Act stipulates that the government can exercise on the GST Council recommendation. The Central Government knew that there was no recommendation from the GST Council and this aspect is clearly admitted. Yet the Notification No. 56/2023 mentioned that this was issued ‘on the recommendation of the GST Council’.
It was observed by the Hon’ble High Court that in order to exercise the power under Section 168A of the CGST Act, the government is required to show that, on account of the force majeure, it was beyond the control of the authorities to complete or comply within the time limit prescribed under the CGST Act. The GST Council had no occasion to consider existence of force majeure in as much as the same was never placed before the GST Council before issuance of the same. Accordingly, the Notification No. 56/2023 was issued without assessing the existence of a force majeure. Accordingly the High Court set aside the orders issued. Moreover, the Hon’ble High Court observed that the government has the powers under Section 168A(2) of the CGST Act to issue retrospective notifications and that this judgment by the High Court does not prejudice such right.
W&B Comments: This significant judgment by the Hon’ble Gauhati High Court highlights an overreach by the government, which may have far-reaching implications for all orders issued during the extended time period under Notification No. 56/2023. The show cause notices and orders for the financial years 2018-19 and 2019-20 issued after the respective due dates may now be considered time-barred. The cases where the adjudication proceedings under Section 73 are pending at the adjudication stage or appellate stage, the taxpayers may raise the said grounds by the way or additional submission to the reply or appeal, as the case may be. In the cases where only SCN or Order has been issued, such taxpayers may explore the option of challenging the respective SCN or Order before the jurisdictional High Courts.
Even though the Hon’ble Gauhati High Court’s observations come as relief to the taxpayer, the Allahabad High Court[1] and the Kerala High Court[2] in separate judgments have held the similar notifications – Notification No. 09/2023-CT dated 31.03.2023, issued before Notification No. 56/2023, to be valid. In view of the divergent views by various High Courts, this issue is expected to be raised before the Supreme Court. A challenge to this judgement of Hon’ble Gauhati High Court by the GST Department before the Hon’ble Supreme Court is also expected.
[1] Graziano Trasmissioni vs. Union of India reported in [2024] (6) TMI 233
[2] Faizal Traders v. Deputy commissioner reported in [2024] (5) TMI 1183