2025 (6) TMI 350 - HC - GST

Challenge to demand cum SCN - Legality and validity of the Notification No. 56/2023-Central Tax dated 28.12.2023 - HELD THAT - The petitioner is a registered Assesee under the provisions of the Central Goods and Service Tax Act 2017 and the Arunachal Goods and Service Tax Act 2017 and bearing GST Registration No. 12ANEPT8355Q2Z8. The Section 168A was inserted in the CGST Act 2017 vide Section 7 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020. The said provision deals with the power of the Government to extend time limits in special circumstances and provides that notwithstanding anything contained in the CGST Act 2017 the Government may on the recommendations of the GST council by notification extend the time limits specified in or prescribed or notified under the aforesaid Act in respect of actions which cannot be completed or complied with on account of force majeure. The Central Board of Indirect Taxes and Customs vide Notification No. No. 56/2023-Central Tax dated 28.12.2023 in exercise of powers conferred under the provisions of Section 168A of the CGST Act 2017 extended the limitation provided under Sub-section (10) of the Section 73 of the CGST Act for the financial year 2018-19 and 2019-20 - In terms of the said extension of time so prescribed proceedings came to be instituted against the petitioner s firm herein and accordingly on conclusion of the same order in original dated 29.08.2024 was passed confirming the demand of Rs.1, 20, 01, 973/- only against the petitioner. Conclusion - This Court is of the considered view that the Notification No. 56/2023-Central Tax dated 28.12.2023 would not be sustainable and accordingly stands set aside and quashed. Petition disposed off.

Summary

The core legal questions considered in this judgment revolve around the validity and legality of a government notification extending the time limit for issuance of certain tax-related orders under the Central Goods and Services Tax Act, 2017 (CGST Act). Specifically, the issues include:

1. Whether Notification No. 56/2023-Central Tax, dated 28.12.2023, issued under Section 168A of the CGST Act, 2017, extending the time limit for issuance of orders under Section 73 of the CGST Act, is legally sustainable.

2. Whether the extension of time under Section 168A can be validly made without a recommendation from the GST Council as mandated by the statute.

3. Whether the extension under Section 168A can be granted in the absence of force majeure conditions as defined under the Act.

4. The legal effect of the Coordinate Bench's earlier judgment quashing the same notification and related orders in analogous proceedings.

Issue-wise Detailed Analysis

Issue 1: Validity of Notification No. 56/2023-Central Tax, dated 28.12.2023

The legal framework governing this issue is Section 168A of the CGST Act, 2017, which empowers the Government to extend prescribed time limits by notification, but only on the recommendation of the GST Council and in respect of actions that cannot be completed due to force majeure. The notification in question extended the limitation period for issuance of orders under Section 73 for financial years 2018-19 and 2019-20.

The Court noted that a Coordinate Bench had earlier held this notification ultra vires the Central Act and quashed it, reasoning that it was issued without the GST Council's recommendation and without any force majeure condition. The Court agreed with these findings, emphasizing that the notification failed to comply with the statutory preconditions.

Key evidence included the absence of any GST Council recommendation and the lack of force majeure circumstances. The Court applied the law strictly, holding that the Government's power to extend time limits under Section 168A is conditional and cannot be exercised arbitrarily.

Competing arguments by the respondents, which suggested that the Government could extend time limits without GST Council recommendation, were rejected as inconsistent with the statutory language and constitutional principles of cooperative federalism.

Conclusion: The notification was held invalid and set aside.

Issue 2: Requirement of GST Council Recommendation under Section 168A

The Court undertook a detailed examination of the term "recommendation" as used in Section 168A, relying on dictionary definitions and authoritative precedent, notably the Supreme Court's decision in V.M. Kurian v. State of Kerala. The Court emphasized that "recommendation" implies a favourable report or advice, which is a sine qua non for valid exercise of delegated power.

Further, the Court analyzed the constitutional scheme under Articles 246A and 279A of the Constitution, which establish the GST Council as a constitutional body to harmonize GST laws between the Union and States. The GST Council's role is central to cooperative federalism, and its recommendations are a necessary prerequisite for certain governmental actions, including under Section 168A.

The Court also discussed the Supreme Court's ruling in Mohit Minerals Pvt. Ltd., which clarified that while some GST Council recommendations may be binding and others not, the absence of any recommendation where the statute requires one renders the exercise of power invalid. The Court rejected the respondents' submission that the Government could act without a recommendation simply because some recommendations are not binding.

In sum, the Court held that the statutory requirement of a GST Council recommendation is mandatory and non-negotiable for the validity of the notification extending time limits.

Issue 3: Absence of Force Majeure Conditions

Section 168A allows extension of time limits only in respect of actions that cannot be completed due to force majeure. The Court examined the Explanation to Section 168A, which enumerates examples of force majeure such as natural calamities, war, and epidemics.

The Court observed that the GST Council had explicitly decided against further extension beyond a three-month period, indicating there was no force majeure condition warranting extension. Since the notification was issued without GST Council recommendation, it necessarily lacked consideration of force majeure.

The Court concluded that the absence of force majeure conditions further invalidated the notification.

Issue 4: Effect of Coordinate Bench Judgment

The petitioner's challenge was supported by the Coordinate Bench's earlier judgment in WP(C) No. 3585/2024, which quashed the same notification and related orders. This Court expressed respectful agreement with that decision and applied its conclusions to the present case.

The Coordinate Bench had held that the impugned orders were passed beyond the prescribed time limits and were therefore invalid. The Court adopted these findings and set aside the impugned Demand-cum-Show Cause Notice and Order-in-Original passed against the petitioner.

Significant Holdings

"For the Government to exercise the powers under Section 168A to extend the time limit specified or prescribed or notified, it can be made on the recommendation of the GST Council by way of a notification in respect to acts which could not be completed or complied with due to force majeure."

"The use of the phrase 'on the recommendation of the Council' in Section 168A prima facie suggests that the power to be exercised under Section 168A by the Government is when a recommendation is made by the GST Council."

"The meaning of the word 'recommend' when read in the context of the Rules shows that it means 'giving of a favourable report opposed to an unfavourable one'. Accordingly, recommendations by the GST Council are sine qua non for exercise of power under Section 168A."

"The absence of any recommendation by the GST Council and the absence of force majeure conditions render the Notification No. 56/2023-Central Tax, dated 28.12.2023 ultra vires the Central Act and not legally sustainable."

"The power conferred on the Government under Section 168A to extend the timelines is a delegated power and must conform to the stipulations contained in the parent Act, including the requirement of GST Council recommendation."

"The Government's issuance of Notification No. 56/2023-Central Tax, dated 28.12.2023, stating it was 'on the recommendations of the Council' when no such recommendation existed, amounts to a colourable exercise of power."

"The Demand-cum-Show Cause Notice and the Order-in-Original passed pursuant to the invalid notification are also liable to be set aside."

Core principles established include the mandatory nature of GST Council recommendations for certain delegated powers under the CGST Act, the necessity of force majeure conditions for extension of time limits under Section 168A, and the constitutional importance of cooperative federalism as embodied in the GST regime. The judgment reaffirms that delegated legislation must strictly adhere to the conditions prescribed by the parent statute and that any colorable exercise of power is liable to be struck down.

Final determinations on the issues are:

(i) Notification No. 56/2023-Central Tax, dated 28.12.2023, is ultra vires and quashed.

(ii) Extension of time limits under Section 168A without GST Council recommendation is invalid.

(iii) Extension of time limits under Section 168A without force majeure is invalid.

(iv) Consequent Demand-cum-Show Cause Notice and Order-in-Original based on the invalid notification stand set aside and quashed.