2025 (7) TMI 404 - HC - GST

Extension of period of limitation for issuance of SCN - Constitutional validity of Section 7 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 (Annexure P-2) whereby Section 168A is inserted in the Goods Services Tax Act 2017 - insertion beyond the legislative competency - applicability of N/N. 9/2023- Central Tax dated 31.03.2023 (Annexure P-5) and 56/2023- Central Tax dated 28.12.2023 (Annexure P-6) - HELD THAT - The subject matter of the challenge in this petition whereby the legality validity and propriety of Notification Nos.9 and 56 of 2023 dated 31.03.2023 28.12.2023 respectively are already under consideration before the Hon ble Supreme Court of India in M/s HCC-Sew-MEIL-AAG-JV vs. Assistant Commissioner of State Tax Ors. 2025 (4) TMI 60 - SC ORDER . Since the issues involved in this petition are already pending consideration before the Hon ble Supreme Court therefore keeping in view the judicial discipline it is refrained from giving opinion with respect to either the vires of Section 168-A or aforesaid notifications as assailed in this petition - the present petition shall be governed by the judgment passed by the Hon ble Supreme Court and the decision thereto shall be binding on this case also. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether Section 7 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which inserted Section 168A into the Central Goods & Services Tax Act, 2017, is ultra vires, beyond the legislative competence, arbitrary, and a misuse of authority.

- Whether Notification Nos. 9/2023-Central Tax dated 31.03.2023 and 56/2023-Central Tax dated 28.12.2023, which extended the time limit under Section 73(10) of the Central GST Act, 2017 to pass orders under Section 73(9), are invalid as they were issued without legislative competence and beyond the scope of the enabling Act.

- Whether the order dated 12.03.2025 by the Additional Commissioner dismissing the petitioner's appeal against the demand order dated 12.03.2024 is legally sustainable, particularly in light of the above contentions.

- Whether the extension of time limit for adjudication under Section 73 of the GST Act and SGST Act for the financial year 2018-19 (and 2019-20 as per related Supreme Court proceedings) by invoking Section 168A is legally permissible.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Legislative Competence of Section 7 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, inserting Section 168A into the GST Act

Relevant Legal Framework and Precedents: The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 was enacted to amend various tax statutes, including the GST Act. Section 7 of this Act inserted Section 168A into the GST Act, purportedly to extend time limits for adjudication of demands and proceedings under GST. The question of legislative competence arises whether such insertion falls within the scope of the enabling Act and the constitutional legislative powers.

Court's Interpretation and Reasoning: The petitioner challenged the insertion as ultra vires and arbitrary. However, the High Court refrained from expressing any opinion on this issue, as the matter was already sub judice before the Supreme Court. The Court acknowledged the existence of conflicting High Court opinions and the ongoing Supreme Court proceedings.

Key Evidence and Findings: The petitioner relied on the text of Section 7 and the enabling Act, arguing that the insertion exceeded the scope of the parent Act and was a misuse of delegated legislative power. The Court noted these contentions but did not adjudicate them due to judicial discipline and pending Supreme Court adjudication.

Application of Law to Facts: The Court recognized that the insertion of Section 168A had the effect of extending limitation periods for passing orders under GST, which was the crux of the controversy. However, it deferred to the Supreme Court's ultimate authority on the legislative competence and validity of the provision.

Treatment of Competing Arguments: The Court noted the petitioner's arguments of arbitrariness and ultra vires insertion, while also acknowledging the government's position that the insertion was valid and within legislative competence. Without ruling, the Court maintained judicial restraint.

Conclusion: The Court did not decide on the validity of Section 168A but held that the issue is pending before the Supreme Court and the decision thereon would be binding.

Issue 2: Validity of Notification Nos. 9/2023 and 56/2023 Extending Time Limits under Section 73(10) of the GST Act

Relevant Legal Framework and Precedents: Section 73 of the GST Act governs the determination of tax not paid or short paid, and Section 73(10) prescribes the time limit for passing orders. The Notifications in question purportedly extend this time limit under the authority of Section 168A.

Court's Interpretation and Reasoning: The petitioner contended that these Notifications were issued without legislative competence and were therefore invalid. The Court observed that these Notifications were challenged in the Supreme Court in a connected case, where a notice had been issued and interim relief sought.

Key Evidence and Findings: The Court referred to the Supreme Court's order in the related Special Leave Petition, which highlighted the cleavage of opinion among High Courts on the issue of whether the time limits under Section 73 could be extended via Section 168A. The Supreme Court had issued notice and reserved interim relief.

Application of Law to Facts: Given the pendency of the Supreme Court's adjudication on the validity of the Notifications, the High Court refrained from expressing any opinion on their legality. The Court directed that the matter be governed by the Supreme Court's decision.

Treatment of Competing Arguments: The petitioner argued the Notifications were arbitrary and beyond the scope of the law, while respondents defended them as valid extensions under the newly inserted Section 168A. The Court did not resolve these conflicting contentions.

Conclusion: The Notifications' validity remains undecided at the High Court level and is subject to the Supreme Court's final ruling.

Issue 3: Legality of the Order Dismissing the Petitioner's Appeal Against the Demand Order

Relevant Legal Framework and Precedents: The appeal was filed under the GST appellate mechanism challenging the demand order passed under Section 73(9) of the GST Act. The petitioner contended that the demand was affirmed without cogent reasons and that the appeal dismissal was improper.

Court's Interpretation and Reasoning: The High Court noted that the appeal dismissal was connected to the broader question of the validity of extended limitation periods and related Notifications. Since these legal questions were pending before the Supreme Court, the Court restrained itself from interfering with the appellate order.

Key Evidence and Findings: The petitioner's grievance was that the demand was upheld without sufficient justification. However, the Court did not delve into the merits of the demand order or the appeal dismissal, given the overarching legal issues pending at the Supreme Court.

Application of Law to Facts: The Court stayed coercive action against the petitioner based on the appellate order until the Supreme Court's final adjudication, thereby protecting the petitioner's interests without ruling on the substantive correctness of the demand or appeal dismissal.

Treatment of Competing Arguments: The petitioner sought quashing of the appellate order; respondents supported its validity. The Court avoided adjudication in deference to the higher court's pending decision.

Conclusion: The appellate order dismissal stands subject to the Supreme Court's final decision, with interim protection granted to the petitioner.

Issue 4: Extension of Time Limit for Adjudication under Section 73 of the GST Act via Section 168A

Relevant Legal Framework and Precedents: Section 73 prescribes the time limit for adjudication of demands for tax not paid or short paid. Section 168A, inserted by the 2020 Amendment Act, purportedly allows extension of these time limits. The legality of such extension is under challenge.

Court's Interpretation and Reasoning: The Supreme Court's order in the connected case explicitly framed the issue whether time limits for adjudication under Section 73 could be extended