“Notification Issued Without GST Council's Recommendation”: Gauhati HC Sets Aside Notification Extending Time Line For Issuance Of Order For A.Y. 2018-19 And 2019-20

The Gauhati High Court allowed the batch of writ petitions challenging the Notification No. 56/2023 dated 28.12.2023 extending the period of limitation for issuance of Order u/s 73(10) of the CGST Act, 2017 for the Assessment Year 2018-19 and 2019-20.

The Court opined that the existence of the recommendation is a sine qua non for exercising the power under Section 168A to extend the timelines and without the recommendations, the exercise of the power would be legally not sustainable.

The Bench of Justice Devashis Baruah stated that “……the Notification No.56/2023-CT was issued without the recommendation and that natural corollary thereof is that the GST Council had no occasion to consider existence of force majeure inasmuch as the same was never placed before the GST Council before issuance of the same. Therefore, the Notification No.56/2023-CT if construed from that angle also would be a notification issued without the force majeure condition being not considered in accordance with law.”

GST Notification No. 56/2023-Central Tax, issued on December 28, 2023, extends the deadlines for issuing orders related to the recovery of unpaid tax or wrongly utilized input tax credit (ITC) under Section 73(9) of the Central Goods and Services Tax (CGST) Act, 2017. For the financial year 2018-19, the deadline for issuing orders has been extended to April 30, 2024. Similarly, for the financial year 2019-20, the deadline is now extended to August 31, 2024.

Section 168A of the CGST Act, 2017 empowers the Government to issue Notification to extend time limit specified/prescribed/notified under the CGST Act which cannot be complied due to force majeure.

Section 73 of the CGST Act, 2017 provides that if the proper officer finds that tax has not been paid, has been short paid, erroneously refunded, or input tax credit has been wrongly availed or utilized, they shall issue a notice to the person, requiring them to show cause why they should not pay the specified amount with applicable interest under Section 50 and a penalty as per the Act or rules.

Section 73(9) of the CGST Act, 2017 provides that the proper officer will review any representations made by the person liable for tax before deciding on the amount owed. They will calculate the total tax, interest, and a penalty, which will be either 10% of the tax amount or ₹10,000 whichever is greater. After this determination, the officer will issue an official order outlining the total amount due.

Section 73(10) of the CGST Act, 2017 requires the proper officer to issue order under Section 73(9) within three years from the due date for furnishing of relevant annual return.

Facts of the case:

The assessees/Petitioners are challenging their respective Orders issued under Section 73(9) of the Central Goods and Service Tax Act, 2017 (CGST Act) and the Assam Goods and Services Tax Act, 2017 (Assam GST Act). The challenge arises from the central Notification No. 56/2023-CT dated 28.12.2023, which extended the period for passing an order under Section 73(10) of the CGST Act by invoking Section 168A of the CGST Act. The assessees challenged the imposition under the State Act on the ground that there is no Notification issued under Section 168A of the State Act extending the period for passing order under Section 73(10) of the State Act.

The assessee submitted that there is no recommendation from the GST Council prior to issuance of the Notification No.56/2023, the said notification is ultra vires the provisions of Section 168A of the Central Act. The Notification No.56/2023 had claimed that it was issued on the basis of recommendation of the Council which was incorrect. The affidavits were filed by the CGST Department wherein it was admitted there were no recommendations of GST Council for Notification No. 56/2023. The recommendations of the GST Council were not binding and only persuasive in nature therefore not required under section 168A of the CGST Act, 2017 and Assam GST Act, 2017.

The department submitted that all recommendation of the GST Council are not binding and as such even without the recommendation, the Government could exercise the powers under Section 168A of the Central Act. In respect to the Notification No.56/2023-CT, there was no recommendations made by the GST Council for issuance of the said notification and to his knowledge there is also no ratification by the GST Council till date.

Observations of the High Court:

The bench looked into Section 168A of both the Central Act and the State Act and noted that 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 challenge to the Notification No.56/2023-CT is on account of absence of recommendation by the GST Council and existence of force majeure as defined in the Explanation to Section 168A of the Central Act.

The bench further observed that both the Central Act as well as the State Act do not define the term “recommendation”. Under such circumstances, it would be necessary to understand the impact of the word “recommendation” in the context of the provisions of the Constitution as well as the Central Act and State Act. Article 246A of the Constitution confers both upon the Parliament and the State Legislature simultaneous power to legislate on Goods and Service Tax. The said power can be exercised notwithstanding anything contained in Article 246 and 254 of the Constitution.

The bench stated that the object behind the insertion of the Article 246A and Article 279A and overriding Article 254 is to promote fiscal federalism and cooperative federalism. Under such circumstances, the recommendations to be made by the GST Council if required as per the provisions of the Central Act or the State Act has to be construed to be a sine qua non for exercise of power by the Union or the State Government. In other words, wherever the provisions of the Central Act or the State 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 bench referred to the case of Union of India and Another v. Mohit Minerals Private Limited [(2022) 10 SCC 700] where the Supreme Court had observed that “…..when the Government is exercising power to notify secondary legislations to give effect to the uniform taxation system, the recommendations are binding. Be that as it may, irrespective of the fact whether the recommendations are binding or not can it be said that without recommendations, the power under Section 168A could be exercised….”

The power conferred on the Government under Section 168A to extend the timelines is power conferred under both the Central Act and the State Act. This power is conferred on the basis of the exercise of the legislative powers of the Parliament and the State Legislature as the case may be. Under such circumstances, when such power is conferred on the Government to make delegated legislation, the said power has to confirm to the stipulations contained in the parent Act and the Notification No.56/2023-CT had to confirm to the stipulations prescribed in Section 168A of the Central Act which would include the requirement of the recommendations of the GST Council, added the bench.

The bench further opined that “the recommendation to be made by the GST Council have also to be based upon the existence of force majeure conditions. In the 49^th Meeting of the GST Council, it was clearly recorded that there shall be no further extension beyond the three months in the interest of the tax payers. The Notification No.56/2023-CT was issued without the recommendation and that natural corollary thereof is that the GST Council had no occasion to consider existence of force majeure inasmuch as the same was never placed before the GST Council before issuance of the same. Therefore, the Notification No.56/2023-CT if construed from that angle also would be a notification issued without the force majeure condition being not considered in accordance with law.”

The bench concluded that the Notification No.56/20123-CT is ultra vires the Central Act and the same is not legally sustainable in law.

In view of the above, the bench allowed the petition.

Counsel for Petitioner/ Assessee: Nitu Hawelia, Advocate, Medha Lila Gope, Advocate, N. Gogoi, Advocate, R. S. Mishra, Advocate, D. Saraf, Advocate, A. Jain, Advocate and H. Raichandani, Advocate

Counsel for Respondent/ Department: S. C. Keyal, SC, CGST, Dr. B. N. Gogoi, SC, CGST and B. Gogoi, SC, Finance and Taxation

Case Title: M/s Barkataki Print and Media Services v. Union of India and Ors.

Case Number: WP(C)/3585/2024

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