2025 (5) TMI 41 - HC - GST

Challenge to order dated 29.12.2023 passed under Section 73(9) of the U.P. GST Act 2017 - time limitation - no personal hearing was given as envisaged under Section 75(4) of the Act 2017 - violation of principles of natural justice. Time Limitation - HELD THAT - Reliance placed in M/s Manoj Glass vs. State of U.P. 2025 (4) TMI 1464 - ALLAHABAD HIGH COURT wherein it is noticed that the notification dated 21.07.2022 by which the date for passing of order was extended upto 30th September 2025 was not brought to the notice of the Court at the time of decision in the aforesaid Writ Tax No.264/2024 - as the first judgment was apparently erroneous and it is noticed that the State proposes to file an application seeking review of judgment dated 12.11.2024 the first ground is not tenable. Violation of principles of natural justice - HELD THAT - It is fairly submitted that opportunity of hearing envisaged under section 75(4) of the Act 2017 has not been given therefore only on this second ground this writ petition is allowed and the impugned order is set aside. Conclusion - i) The limitation period for issuance of recovery orders under Section 73(9) is three years from the due date of annual return filing but this period can be validly extended by government notifications including exclusion of certain periods from limitation computation. ii) The procedural safeguard of personal hearing under Section 75(4) is mandatory and non-compliance renders the order liable to be set aside irrespective of limitation compliance. Petition allowed in part.

Summary

The core legal questions considered by the Court were: (1) Whether the impugned order dated 29.12.2023 passed under Section 73(9) of the U.P. GST Act, 2017 for the financial year 2017-18 was barred by limitation; and (2) Whether the petitioner was denied the personal hearing mandated under Section 75(4) of the U.P. GST Act, 2017 prior to issuance of the impugned order.

Regarding the limitation issue, the Court examined the statutory time limits prescribed under Section 73(10) of the U.P. GST Act, 2017, which requires that an order under Section 73(9) be issued within three years from the due date for furnishing the annual return for the relevant financial year. The due date for filing the annual return under Section 44(1) is ordinarily 31st December following the financial year, but this date was extended to 5th February 2020 for FY 2017-18 by a Central Board of Direct Taxes and Customs notification dated 3.2.2018, adopted by the State of U.P. on 5.2.2020. Thus, the three-year limitation period expired on 5.2.2023.

The petitioner contended that the impugned order dated 29.12.2023 was beyond this limitation period and hence without jurisdiction. The State initially relied on a notification dated 24.4.2023 extending the limitation period to 31.12.2023. However, this notification was retrospective only from 31.3.2023, which did not cover the period before that date, rendering it inapplicable to orders passed prior to 31.3.2023.

Subsequently, the State placed before the Court a notification dated 21.7.2022, which had not been brought to the Court's notice in earlier related judgments. This notification, issued under Section 168A of the U.P. GST Act, extended the time limit under Section 73(10) for issuance of orders under Section 73(9) for FY 2017-18 up to 30.9.2023, and excluded the period from 1.3.2020 to 28.2.2022 from the computation of limitation. This effectively extended the limitation period beyond 5.2.2023 to 30.9.2023. Further, the subsequent notification dated 24.4.2023 extended it further to 31.12.2023 with retrospective effect from 31.3.2023.

Applying these notifications, the Court found that the impugned order dated 29.12.2023 was passed within the extended limitation period and was therefore not time barred. The Court noted that the earlier judgment relied upon by the petitioner did not consider the 21.7.2022 notification and was thus erroneous. The State indicated its intention to file review applications in cases where the earlier judgment had been relied upon.

On the second issue, the petitioner argued that no personal hearing was granted as required by Section 75(4) of the U.P. GST Act, 2017 before passing the impugned order. The State candidly admitted that the opportunity of personal hearing was not provided. The Court held that this procedural lapse was fatal to the validity of the impugned order. Consequently, while dismissing the writ petition on the limitation ground, the Court allowed it on the ground of denial of personal hearing, setting aside the impugned order. The Court granted liberty to the proper officer to proceed afresh after affording the petitioner a personal hearing, directing completion of proceedings within two months.

The Court's reasoning relied on the statutory provisions:

- Section 73(9) and (10) U.P. GST Act, 2017: prescribing the time limit for issuance of orders for recovery of tax not paid or short paid or input tax credit wrongly availed or utilized;

- Section 44(1) U.P. GST Act, 2017: prescribing due date for filing annual returns;

- Section 75(4) U.P. GST Act, 2017: mandating personal hearing before passing an order;

- Notifications dated 21.7.2022 and 24.4.2023 extending limitation periods and excluding certain periods from limitation computation.

In addressing the limitation issue, the Court carefully analyzed the interplay between statutory limitation provisions and executive notifications extending limitation periods. It emphasized that such notifications must be brought to the Court's notice to be considered, and their retrospective effect must be scrutinized to determine applicability. The Court rejected the petitioner's reliance on a prior judgment that did not consider the 21.7.2022 notification, underscoring the importance of comprehensive consideration of all relevant notifications.

On the procedural issue, the Court underscored the mandatory nature of the personal hearing requirement under Section 75(4). The absence of such hearing rendered the impugned order unsustainable despite the order being within limitation. The Court thus balanced the substantive and procedural aspects, allowing the petition only on procedural grounds while upholding the validity of the order on limitation grounds.

Regarding competing arguments, the petitioner's primary contention was limitation bar, supported by earlier case law, whereas the State relied on subsequent notifications extending limitation and candidly admitted procedural lapse. The Court gave precedence to the statutory and notification-based extension of limitation but enforced the procedural safeguard of personal hearing.

Significant holdings include the following:

"When we take into consideration the notification aforesaid what we find is that though by virtue of the Central Board of Direct taxes and Customs Notification dated 03.02.2018 the date for filing annual return for the financial year 2017-18 which would normally be 31.12.2018 stood extended till 05.02.2020... in view of the Notification dated 21.07.2022 which came into effect from 01.03.2020 the said time limit specified under Sub-section 10 of Section 73 for issuance of order under Sub-section 9 of Section 73... stood excluded up to the 30th day of September, 2023... and by the subsequent notification... the said time limit stood extended till 31.12.2023 for the financial year 2017-18."

"The impugned order has been passed on 13.12.2023, therefore, it has been passed within the time limit as extended by the Notifications referred hereinabove."

"The petitioner has not brought the said Circular on record." (referring to the 21.07.2022 notification)

"The impugned orders are beyond the time limit prescribed under sub Section 10 of Section 73 as applicable for the financial year 2017-18 and therefore the impugned orders are beyond jurisdiction being barred by the time provided in the said provision, therefore, we allow the writ petition and quash the impugned orders..." (quoted from earlier judgment which was overruled)

"The opportunity of hearing envisaged under section 75(4) of the Act, 2017 has not been given, therefore, only on this second ground, we allow this writ petition and set aside the impugned order, however, with liberty to the proper officer to proceed against the petitioner as per law, afresh."

Core principles established include:

- The limitation period for issuance of recovery orders under Section 73(9) is three years from the due date of annual return filing, but this period can be validly extended by government notifications, including exclusion of certain periods from limitation computation.

- Such notifications must be brought on record and considered to determine limitation applicability.

- The procedural safeguard of personal hearing under Section 75(4) is mandatory and non-compliance renders the order liable to be set aside, irrespective of limitation compliance.

- Where an order is set aside for lack of personal hearing, the authorities are entitled to proceed afresh within the prescribed limitation period.

In conclusion, the Court dismissed the writ petition on the ground of limitation, holding the impugned order validly passed within extended time limits by virtue of notifications dated 21.7.2022 and 24.4.2023. However, it allowed the petition on the ground of denial of personal hearing, setting aside the order and directing fresh proceedings with personal hearing within two months.