Petition raising challenge to validity of Section 168A has been segregated. Those may be heard later.

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The Allahabad High Court has dismissed a batch of petitions against Section 73 Goods and Services Tax ( GST ) notices issues, invoking the extended period of limitation.

In the batch of petitions, challenge was raised to adjudication proceedings/orders for F.Y. 2017-18, on other grounds including ground as to adjudication order exceeding the show cause notice; principles of natural justice having been violated; rectification/correction of GSTR-3B and other issues.

Rakesh Ranjan Agarwal, Senior Advocate has first pointed out that all petitioners had filed their Annual Returns before the last extended date for filing annual returns for F.Y. 2017-18 i.e. 07.02.2020.

The marginal note appended to Section 168 A of the Act reads: “Power of Government to extend time limit in special circumstances.” Thus, it has been pointed out that blanket extension of time was not contemplated to be granted.

He submitted that the legislature did not intend to grant blanket power to the Government to extend the limitation of time. Contrasting the newly added provision with Section 172 of the Central Act and the State Act, it has been submitted, the general power to grant such extension conferred in Section 172 is subject to the direct check of the legislature, inasmuch as the Government seeking to exercise that power would have to lay and thus seek approval of its ‘general order’ by the respective legislative body. Thus, it was neither contemplated by the legislatures nor it could be construed that there was any extension of time contemplated or permitted to be granted to file either the Annual Return for F.Y. 2017-18 beyond the date 07.02.2020, or to pass an adjudication order beyond 06.02.2023

Second, it has been pointed out, Notification No. 14 of 2021 dated 01.05.2021 did not cause any effect on the limitation to pass the adjudication order for F.Y. 2017-18, inasmuch as the period of limitation that was extended upto 30.06.2021 was only with respect to acts that could not be completed or compiled during the period 15.03.2020 to 20.08.2020. Even the requirement of filing an e-way bill was not relaxed. Benefits were contemplated and granted with respect to completion of other proceedings (by the revenue authorities) and filing of appeals (by the assessees).

Shambhu Chopra, counsel submitted that, “the impugned notifications are ultra vires to Section 168A of the Central Act and the State Act. Yet, first, according to him also, a valid notification under Section 168A of the Act may have been issued, if necessary, due to ‘force majeure’ circumstance existing. In its absence, no such notification may have been issued. It is a matter of common knowledge that the ‘force majeure’ circumstance i.e. COVID-19 did not exist on the date of issuance of the impugned notifications i.e. 30.3.2023 and 24.4.2023. Therefore, the exercise of the power is perverse.”

It was also submitted that the impugned notifications are discriminatory to the extent they partially modified the earlier Notifications dated 1.5.2021 and 28.6.2021 issued by the Central Government, and State Government respectively. That part of the earlier notifications which were in favour of the petitioner, has been done away. At the same time, the revenue has taken undue benefit by seeking extension of limitation to initiate adjudication proceedings.

The revenue counsel submitted that “inconsistency may not be reached solely on the strength of the language of Section 168A of the Central Act and the State Act but by examining the context in which that section has been incorporated.

Referring to the Explanation of Section 168A of the Central Act and the State Act, he would submit besides the specific circumstances enumerated therein of war, epidemic, flood, drought, cyclone and earthquake and other calamity caused by nature, a residuary clause exists to include an event that may otherwise affect of the implementation of any of the provisions of the Act.

In his submission, the last appearing words in the Explanation enlarge the scope of applicability under Section 168A of the Act to other circumstances not attributable directly to unforeseen and clearly definable events identified as “force majeure” circumstance.

Thus, disruption of the revenue functioning over a long period of time itself is a circumstance that may fall within the description “otherwise affected the implementation of the provisions of the Act” appearing in Section 168A of the Act. That discussion also exists in the minutes of the Council.

He added that the action taken by the Central and the State Governments/delegates is in conformity to the provisions of Section 168A of the Central Act and the State Act. Gaurav Mahajan, appearing for the Central Board of Indirect Taxes and Customs (CBIC) further submitted that, neither the Council nor the Government have acted mechanically.

The bench noted, “As to the nature of “force majeure”, the Explanation to the said section offers an inclusive definition namely – war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by the nature. The words “otherwise affected” take colour from the terms and expressions appearing earlier.”

It was further noted that the Explanation also suggests that the power may be exercised in a situation where in the presence of a “force majeure” circumstance, the implementation of any of the provisions of Central Act and the State Act may have been impaired, to the extent it may necessitate extension of time limits, referred to Section 168A(1) of the Act.

It was also stated by the bench that, “Tested on the above principle, as a fact, the recommendation of the Council to issue the impugned notifications – to extend the time limit,

exist. Also, the occurrence of the “force majeure” circumstance i.e. epidemic COVID-19 is undisputed.”

The bench of Justice Donadi Ramesh and Justice S D Singh further noted that, The period

15.03.2020 to 28.02.2022 remains the darkest period of our recent past, arising after the second World War. No calamity of equal magnitude has disrupted human life since then. In the context of a global village, that our world has become, the pandemic COVID-19 disrupted all human activities across all continents and left no strata of the society, organisation or institution or other entity, unaffected over a long duration of time. The full impact of the COVID-19 is still to be assessed.”

Further noted, “It is undisputed to the petitioners that the last date of filing of Annual Return for the F.Y. 2017-18 was extended up to 7.2.2020. Consequently, no scrutiny or audit for the F.Y. 2017-18 may have been (effectively) undertaken, before that day.”

The Division Bench further went on to make the following observations—

“Therefore, we conclude, the revenue authorities were visited with a circumstance that was not of their making. It was not a mere difficulty of the usual kind. It was not a wholly temporary or transient impairment caused to their functioning. Beginning 15.03.2020, it had disabled the working of the revenue authorities, over a long period, occasioned by a ‘force majeure’ circumstance.”

“It is equally admitted and undeniable to the petitioners that the time kept ticking and hard as the times were and despite continuance of the extreme circumstances and disablement accompanying, caused by COVID-19, life moved on. Economic activity was witnessed. Businesses continued to exist, resulting in Monthly and Annual Returns being filed both for the entire duration of time through which COVID-19 pandemic spread (in waves), and continued to disable human activity. Thus, Annual Returns came to be filed for the subsequent F.Ys. 2018-19 and 2019-20 as well. All such returns remained subject to scrutiny and audit. It is that volume of work that has been taken note of and considered in the 47th and 49th meetings of the Council. With reference to that work, legislative decisions have been made, in the backdrop of the disruption caused by the pandemic COVID-19.”

“Though the Proper Officer may remain authorised to act under Section 73 of the Central Act and the State Act independent of an audit and scrutiny at the same time that outcome would

be dictated by facts of an individual case but not by way of a principle in law. In the entire scheme of the Central Act and the State Act, by way of procedure, steps contemplated under Section 61 and 65 would remain a normal occurrence. By very nature and by virtue of specific provisions of the Central Act and the State Act, those would have to precede action under Section 73 of those enactments.”

“To the extent any legislature may have acted to provide for a law having nexus to the circumstance or the mischief sought to be addressed, to the extent it may be authorised to act in the manner it did, no fault may be found with the same. In exercise of judicial review, we may remain ever reluctant to explore the validity of that action beyond this point.”

It was noted that, “Submission that the resolution of the 49th meeting of the Council offered only a partial modification of the first time extension, also cuts no ice. The impugned notifications remains referable to exercise of legislative power, under Section 168A of the Central Act and the State Act. It was exercised in the manner prescribed. The fact that the Council chose to make a partial modification remains within the insulated realm of legislative wisdom.”

In the context of the conditional legislation that Section 168A is, in our opinion the conditions were wholly fulfilled, the bench noted.

“Seen in that light the decisions cited by learned counsel for the petitioners are found to be distinguished. The writ petitions challenging the issuance of the impugned notifications must fail”, the bench noted, dismissing the petitions challenging the issuance of the impugned notifications.

The Bench further added that, “Hearing of all cases where adjudication proceedings are pending may recommence and be concluded, after excluding the duration of stay of the extended limitation to frame the adjudication order. Wherever adjudication orders have been passed and recovery stayed by this Court, the petitioners shall have 45 days from today to file appropriate appeals”

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