Madras High Court Delivers A Googly - Rules Notifications 09/2023 – CT And 56/2023-CT Issued U/s 168A Are Invalid And Illegal, But Orders Issued U/s 73(10) Are Not Time Barred

BRIEF FACTS OF THE CASE

• The issue consisted of batch petitions filed with the Hon'ble Madras High Court involving more than 300 petitions. The challenge was made to Notification Nos. 09/2023-C.T. and 56/2023-C.T. and the corresponding State tax notifications, declaring them as ultra vires the scheme of Section 168A of CGST/TN GST Act.
• The issues for examination before the Hon'ble Court were as follows -
  1. Whether there existed 'force majure' that necessitated the invocation of section 168A for issuance of Notification Nos. 09/2023-C.T. and 56/2023-C.T.?
  2. Whether a notification issued under Section 168A based on a mere recommendation by the GST Implementation Committee (GIC) that is ratified subsequently by the GST Council be considered valid?
  3. Whether section 168A can supplant or diminish the benefit granted by the Hon'ble Apex Court's order dated 10.01.2022 under Article 142 of Constitution of India?

ARGUMENTS MADE BY THE PETITIONERS

• The Petitioners argued that section 168A is a delegated legislation, different from a conditional legislation. Consequently, the notifications issued under the powers of section 168A are open to be tested on all grounds that are generally available to challenge an administrative act.
• The power to issue notification to extend the time limits to do certain acts as specified in the Act takes the form of an exception to the legislative policy and therefore, needs to be construed strictly. The pre-condition to exercising power u/s 168A is there being a force majeure [defined] that prevents the completion of actions within the time limits specified in the Act. It was urged that the inability of the Revenue to complete the adjudication process was attributed to their inaction and delay in setting up suitable system/ infrastructure for carrying out the said proceedings and not a force majeure event.
• In the context of the applicability of the Suo moto order of the Supreme Court, the Petitioners argued that the power under Article 142 of the Constitution of India cannot be exercised in a manner to be in direct conflict with express provisions contained in the statute dealing with the subject. Thus, the directions of the Apex Court will be binding till the time a specific enactment is put in place to substitute the vacuum filled by the order of the Apex Court. Therefore, the order of the Apex Court directing exclusion from limitation period ceased to have effect with the introduction of section 168A and with issuance of Notification No. 13/2022-CT dated 05.07.2022.

ARGUMENTS MADE BY THE RESPONDENTS

• The Respondent on the other hand submitted that the Extension Notification was issued pursuant to the 49th GST Council Meeting acknowledging the difficulties faced by the Government Department during the COVID period. COVID-19 would constitute Force Majeure for the invocation of section 168A and the examination as to the availability or otherwise of materials for the Council to make the recommendation in view of COVID-19 is beyond judicial review.
• The Respondents submitted that the power of the Hon'ble Apex Court under Article 142 of the Constitution of India cannot be limited or restricted by provisions of statute. The Order does not lose its effect with the issuance of a Notification No. 13/2022-C.T. u/s 168A of the CGST Act.

JUDGMENT AND CONCLUSION DRAWN BY THE COURT

• Placing reliance on the Apex Court's judgement in Hamdard Dawakhana v. Union of India reported in 1959 SCC OnLine SC 38, the Hon'ble High Court elucidated the fine line of distinction between conditional legislation and delegated legislation to hold that Section 168A is a delegated legislation.
• After perusing the language of section 75(2) and 75(10), the Hon'ble Court reminded the parties that the limitation is set in the Act for issue of notice and order to ensure finality, certainty, and as a part of public policy. The insertion of section 168A tantamounts to creating an exception, and it is trite law that an exception needs to be construed strictly.
• The Court held that the Council made a recommendation for issuing impugned notifications u/s 168A without considering the relevant supporting materials produced by the Petitioners, and the reasons for delay in adjudication were more because of systemic deficiencies and failure to recruit/appoint adequate officers, which are causes that are self-inflicted/created. Based on the said reason, the Council could not have recommended a further extension. The Court held that a delegated legislation is open to challenge on the ground of failing to consider relevant material. Since the Council was unable to appreciate the appropriate material, the impugned notifications cannot be sustained.

JUDGMENT AND CONCLUSION DRAWN BY THE COURT

• The Court ruled that the requirement of having a recommendation by the GST Council in section 168A is a mandate by Parliament. When law requires a particular act to be done in a specific manner, the act ought to be done in that manner and no other.
• The recommendation of GIC for issuance of Notification No. 56/2023-C.T. was seen as usurpation of power conferred on the GST Council, which would vitiate the very recommendation.
• The Court also observed that the principle of ratification is alien to the exercise of powers under a statutory provision. Therefore, the subsequent ratification by the GST Council would not validate the non-compliance. The discretion must be exercised only by the authority to which it is committed.
• Drawing a distinction between "period of limitation" and "computation of limitation", the Court explained that section 168A was in the nature of "period of limitation" while the Apex Court's order was in the form of "computation of limitation". Since they deal with different aspect altogether, there is no question of overlap or supplant and the order of the Hon'ble Supreme Court dated 10.01.2022 would continue to govern the limitation inasmuch as it provides for exclusion of time from 15.03.2020 to 28.02.2022 for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.
• If the order of the Apex Court is applied, the limitation that would be available to the authorities for issuing notices and passing orders under section 73(10) would be larger than the limitation available in view of the extension under the impugned notifications. The Extension Notification diminishing the limitation period may not be sustainable. However, the authorities under the CGST Act shall have the benefit of exclusion of the period from 15.03.2020 to 28.02.2022.
• Accordingly, the Court has remanded back all the clubbed matters to the Authorities for passing orders afresh within 8 weeks from the date of upload of this Order.

AURTUS COMMENTS

• Section 168A of the CGST Act was a direct response to the challenges posed by the outbreak of COVID-19, and the sole purpose for the insertion of this section was to for the government to exercise this power to extend the time limit only in exceptional circumstances, amongst others, to address the unprecedented challenges caused by the pandemic. However, the Government's use of these provisions to continually extend the time limit for issuing demands and adjudication orders has led to the injudicious exercise of power by the GST authorities, thereby vindicating the Department's internal inefficiencies. Furthermore, as has been witnessed, the extensions granted through the impugned notifications did not result in proper assessments of demands and adjudications, as the adjudicating authorities passed the majority of the orders in the last few days [Hon'ble Delhi High Court in batch petitions W.P.(C) 10869/2024]. Many of these orders have been set aside and the matters have been remanded for fresh adjudication.
• The CBIC vide Circular No. 157/13/2021-GST, dated 20.07.2021, had clarified that while the Suo moto order of the Supreme Court on exclusion of period of 15.03.2020 to 28.02.2022 would apply to all cases of quasi-judicial / judicial proceedings and appeals / petitions, the said order would not apply to issuance of show cause notice, granting time for replies and passing orders, as they may not be covered by the Orders of the Hon'ble Supreme Court as the Order has only been made applicable to matters relating to petitions/applications/suits, etc. The Telangana High Court in Brunda Infra Pvt. Ltd. and Others vs. the Additional Commissioner of Central Tax [WP 1154/2024] had analyzed the question of applicability of the Supreme Court Order to proceedings u/s 73 of the GST Act in the light of CBIC Circular 157/13/2021-GST. The Court held that it is well established that Circulars issued by the Board are binding on the authorities; however, it would be very inappropriate to hold such a circular above the view expressed in a decision of the High Court or Supreme Court. The Court held that the Supreme Court's Order was very well applicable to the proceedings under the GST Act.
• Following a similar stance, the Hon'ble Madras High Court applied the Supreme Court Order to the timelines prescribed under the GST law for all judicial and quasi-judicial proceedings. However, the relevant issue for consideration is that the objective of providing the exclusion by the Hon'ble Supreme Court was to ensure that any period of limitation lapsing during the COVID period should not adversely impact the parties, as the time limit prescribed by the law for filing appeals, etc., is very restricted, ranging from 60 to 180 days. However, where the law provides sufficient timelines [of more than 3 years] to the Department to complete assessments / adjudication, especially considering that there were no force majeure circumstances, would it still be justifiable to burden the taxpayers with an extended period of limitation under the normal assessments?
• Vide the Order of Hon'ble Supreme Court dated 10.01.2022, the timeline for issuing Order u/s 73 of the GST Act stands extended as below (after excluding the period 15.03.2020 to 28.02.2022)

  F.Y.	Original due date for filing annual return	Extended due date for filing annual return	Statutory Limitation period u/s 73(10)	Limitation period u/s 73(10) after taking in to account Supreme Court's Order
  2017-18	31.12.2018	05.02.2020 or 07.02.2020	05.02.2023	13.12.2024
  2018-19	31.12.2019	31.12.2020	31.12.2023	28.02.2025
  2019-20	31.12.2020	31.03.2021	31.12.2024	28.02.2025

• The above timelines shall be applicable only for adjudication proceedings under section 73, and are subject to the final outcome of the Apex Court in M/s HCC-SEW-MEIL-AAG JV vs Asst. Comm. of State Tax and Ors in SLP (C) 4240 of 2025

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