Validity of Notification No. 56/2023-CT Dated 28-12-2023: A Legal Analysis in Light of No GST Council Recommendations & Absence of Force Majeure in under section 168A Requirement to Fulfill Legal Preconditions

IMPORTANT DATES UNDER GST FOR FY 2017-18 TO 2021-22

summary of the prescribed due dates and extended dates for filing annual returns from FY 2017-18 to FY 2021-22, along with relevant information regarding the preservation of accounts and records:

• Last Date to Issue Notice U/s 73 (2) is 33 Months.
• Last Date to Issue Order U/s 73(10) is 36 Months.
• Last Date to Issue Notice U/s 74 (2) is 54 Months.
• Last Date to Issue Order U/s 74(10) is 60 Months. 

• The actual date for issue order under section 73 (10) of GST Act: 
  • For the financial year 2017-18 both the Central Act and the State Act, 
    • Actual due date is 06-Feb-2023. 
    • First Extended due date as per Notification No:13/2022-CT dated 05.07.2022  is 30^th of September, 2023.
    • Second Extended due date as per Notification No:9/2023-CT dated 31-03-2023 up to 31^st of December, 2023
  • For the financial year 2018-19 both the Central Act and the State Act, 
    • Actual due date is 30-Dec-2023
    • First Extended due date as per Notification No:Notification No.9/2023-CT dated 31.03.2023  up to  30-Mar-2024.
    • Second Extended due date as per Notification No:Notification No.56/2023-CT dated 28-12-2023  up to  30-Apr-2024.
  • For the financial year 2019-20 both the Central Act and the State Act, is 30-Mar- 2024
    • Actual due date is 30-Mar- 2024
    • First Extended due date as per Notification No:Notification No.9/2023-CT dated 31.03.2023  up to  30^th June, 2024.
    • Second Extended due date as per Notification No:Notification No.56/2023-CT dated 28-12-2023  up to  31-Aug-2024.

Extension of Time Limits for Issuing Orders Under Section 73: Analysis of Notification No. 13/2022-CT and Notification No.9/2023-CT dated 31.03.2023   & GST Council Recommendations in the 49th Meeting

• The notification you mentioned, No. 13/2022-CT dated 05.07.2022, was indeed issued to extend the time limit for issuing orders under Section 73 of the Central Goods and Services Tax Act, 2017 for the financial year 2017-18. Specifically, it provided an extension of the time limit up to 30th September 2023 for issuing the order as specified under Sub-Section (9) of Section 73.

Section 168A allows for the extension of time limits only in the event of force majeure, such as war, epidemic, natural calamity, or other unforeseen events. The extension allowed due to COVID-19 pandemic. 

• Further various tax administrations requested before the GST Council seeking recommendation for extending the period in respect to the financial year 2017-18, 2018-19 and 2019-20. The GST Council in its 49^th Meeting recommended extension of the time limit under Sub-Section (10) of Section 73 of the Central Act for Financial Years 2017­18, 2018-19 and 2019-20 for only three months. 

The relevant portion of the 49^th Meeting of the GST Council being pertinent to the dispute involved is reproduced herein under:

Agenda item 4(vii) : Extension of time limit under sub-section (10) of section 73 of CGST Act for FY 2017-18, FY 2018-19 and FY 2019-20.

Principal Commissioner (GSTPW) informed that there have been requests from tax administrations for further extension of time limit under Section 73 of CGST Act for issuance of Show Cause Notices (SCN) and Orders for financial year 2017-18, 2018-19 and 2019-20, considering that the scrutiny and audit were delayed because of Covid-19 pandemic. He informed that the issue was discussed by the Law Committee and it was observed that earlier, such extension was given for the F.Y. 2017-18. It was felt by the Law Committee that while there may be a need to provide additional time to the officers to issue notices and pass orders for FY 2017-18, 2018-19 and 2019-20 considering the delay in scrutiny, assessment and audit work due to COVID-19 restrictions, however, the same need to be made in a manner such that there is no bunching of last dates for these financial years as well as for the subsequent financial years. After detailed deliberations, Law Committee recommended that such time limits may be extended for another three months each for the FY 2017-18, 2018-19 and 2019-20. It was discussed in detail in officers meeting where one view was that extension for FY 2017-18 had already been given and further extension may create a perception that it is not a tax friendly measure and against the interest of taxpayers.

The Secretary stated that the Law Committee has recommended the extension of time limit for issuance of SCN and orders. However, the time period for issuance of notices and passing orders for these financial years has already been extended considerably due to extension in due dates of filing annual returns for the said financial years. Further, for FY 2017-18, the date of passing order has already been extended till September 2023. It has been proposed to extend it further from September 2023 to December 2023. He mentioned that while the request of some of the tax administrations was to extend the time limit for a longer period, however, keeping the taxpayers’ interest in mind, the Law committee has recommended an extension of only three months for these three financial years. Since all the states have agreed, the said time limits could be extended.

Hon’ble Member from Bihar stated that while this proposal could be considered, however, it should be decided that such an extension in timelines for these financial years under sub-section (10) of section 73 of CGST Act is being made for the last time.

The Council agreed with the recommendation of the Law Committee made in agenda item 4(vii), along with the proposed notification.”

 On the basis of the said recommendation, the Notification No.9/2023-CT dated 31.03.2023 whereby the period for passing the order in terms of Section 73(9) 

This excerpt relates to the extension of time limits for issuing Show Cause Notices (SCNs) and passing orders under Section 73 of the Central Goods and Services Tax (CGST) Act for financial years 2017-18, 2018-19, and 2019-20, as recommended by the GST Council during its 49th meeting.

Key points:

1. Request for Extension: Various tax administrations sought an extension for these years, citing delays caused by the COVID-19 pandemic.
2. Law Committee\'s Recommendations:
   • There was a concern about the bunching of last dates if extensions were granted for multiple years at once.
   • It was recommended that the time limits be extended by three months for each of the financial years 2017-18, 2018-19, and 2019-20.
3. Council\'s Decision: After discussion, the GST Council agreed to the Law Committee\'s recommendations with the understanding that this would be the final extension for these years.
4. Notification No. 9/2023-CT: Issued based on this recommendation, extending the time for passing orders under Section 73(9) of the CGST Act:
   • For FY 2017-18: Extended to December 31, 2023.
   • For FY 2018-19: Extended to March 31, 2024.
   • For FY 2019-20: Extended to June 30, 2024.

This final extension is meant to provide time to complete the assessment and scrutiny processes, which had been delayed due to the pandemic.

Validity of Notification No. 56/2023-CT Dated 28-12-2023: A Legal Analysis in Light of GST Council Recommendations

Notification No. 56/2023-CT dated 28-12-2023, issued by the Central Board of Indirect Taxes and Customs (CBIC). The notification extends the time limits for passing orders under Section 73(10) of the CGST Act for the financial years 2018-19 and 2019-20, specifically extending the deadlines to 30-April-2024 and 31-August-2024, respectively.

Points of Contention:

1. Lack of Recommendation from the GST Council:
2. Exceeding Legal Authority:
3. Non-Compliance with Procedural Requirements:
4. Requirement of GST Council Recommendation as a Condition Precedent under Section 168A of the CGST and SGST Acts: No Scope for Subsequent Ratification

• The GST Council\'s 49th meeting had recommended extensions only up to 31st March 2024 for FY 2018-19 and 30th June 2024 for FY 2019-20. The council clearly discussed that any further extensions would not be tax-friendly, and the matter was closed as a "final extension."
• As per the CGST Act, any extension of timelines under Section 73(10) must follow the recommendations of the GST Council. Without any fresh request being submitted or a corresponding recommendation from the GST Council for further extension beyond the timelines mentioned in the 49th meeting, the validity of this notification is questionable.
• Section 168A of the CGST Act allows the government to extend timelines due to exceptional circumstances in the event of force majeure, war, epidemic, natural calamity, or other unforeseen events such as the COVID-19 pandemic, but any such extension must align with the GST Council’s recommendations.
• If no formal recommendation from the GST Council was sought or obtained for extending the timelines for FY 2018-19 and FY 2019-20 as per the notification, then the notification could be seen as lacking the necessary legal backing.
• The argument would be that, procedurally, any extension must follow a formal process, including submission to and approval by the GST Council. If this process was not followed for Notification No. 56/2023-CT, the extension granted by this notification could be invalid.

A perusal of Section 168A of both the Central Goods and Services Tax (CGST) Act and the State Goods and Services Tax (SGST) Act makes it clear that the recommendation of the GST Council is a condition precedent for any extension of time limits under the law. The statutory framework mandates that any such extension must be based on the prior recommendation of the GST Council, and there is no provision within the Act for the Council to retrospectively ratify a decision taken by the government or tax authorities without its prior recommendation.

This means that the procedural requirement of obtaining the GST Council\'s approval must be fulfilled before issuing any notification for extensions. Subsequent ratification by the Council after the issuance of such a notification would not cure the defect in the validity of the order. Hence, any notification issued without the Council\'s prior recommendation would lack legal force.

1. Lack of GST Council Recommendation for Extension in Notification No. 56/2023-CT: Examination of Subsequent Meetings and Legal Implications

In the circular dated 14.05.2024 and the affidavit filed by the Assistant Commissioner, Law, before the High Court of Guwahati in WP(C) No.1229/2024 (filed by Arkataki Print and Media Services vs Union of India & Ors againt order issued by the Respondent Authorities on the basis of the Notification No.56/2023-CT dated 28.12.2023), it was mentioned that the matter of extending time limits under Notification No. 56/2023-CT dated 28.12.2023 would be placed before the next GST Council meeting. However, a perusal of the minutes of the subsequent GST Council meetings (50th, 51st, 52nd, 53rd, and 54th meetings) reveals that there was no agenda item seeking recommendations for extending the time limits under Section 73(10) of the CGST Act for the financial years 2018-19 and 2019-20.

This absence of an agenda or recommendation in these meetings indicates that no formal approval was sought from the GST Council, which is a mandatory requirement under Section 168A of the CGST Act. Without the GST Council’s recommendation, the notification in question lacks the necessary legal foundation, as the Council’s recommendation is a condition precedent for issuing such an extension. The failure to bring the matter before the Council despite the assurance in the circular and affidavit raises significant questions regarding the validity of the notification and its enforceability.

1. Challenge to Notification No. 56/2023-CT Dated 28.12.2023: Absence of Force Majeure and Requirement to Fulfill Legal Preconditions

In challenging Notification No. 56/2023-CT dated 28.12.2023, the argument that force majeure does not apply is significant. The COVID-19 pandemic no longer impacted the functioning of the administration during the financial years 2022 and 2023. The pandemic-related disruptions, which had previously justified earlier extensions, were no longer relevant, and the administrative machinery had resumed regular operations by that time.

As such, without proving the existence of force majeure, which is a necessary precondition for further extending the timelines under Section 168A of the CGST Act, any reliance on this ground to justify the extension lacks merit. The burden falls on the Central or State Governments to provide sufficient evidence, by way of affidavit or otherwise, showing specific reasons or material particulars that they were unable to act within the prescribed time due to ongoing force majeure conditions.

Since no such proof has been presented, the justification for extending the deadlines-whether through Notification No. 56/2023-CT or even earlier through Notification No. 9/2023-CT dated 31.03.2023-fails to meet the legal standard required for invoking force majeure. Consequently, both notifications could be subject to judicial interference, given that the extension was granted without satisfying the precondition of force majeure.

1. Allegation of Colorable Exercise of Power in Issuing Notification No. 56/2023-CT: Lack of GST Council Recommendation

The Central Government\'s issuance of Notification No. 56/2023-CT dated 28.12.2023, despite the absence of a formal recommendation from the GST Council, raises serious concerns about the bona fides of the exercise of power. The notification falsely claims that the necessary GST Council recommendation had been obtained, even though a review of the minutes from subsequent GST Council meetings (50th to 54th) reveals that no such recommendation was made for extending the time limits for FY 2018-19 and FY 2019-20.

This discrepancy suggests that the Central Government, in issuing the impugned notification, may have engaged in a colorable exercise of power-a situation where power is exercised under the guise of fulfilling legal requirements but for reasons other than those permitted by law. By falsely asserting that the GST Council’s recommendation had been obtained, the government appears to have misused its authority, thereby undermining the procedural integrity mandated by Section 168A of the CGST Act.

Such an action could be viewed as an abuse of power, where the form of legality is maintained (issuing a notification) while its substance-obtaining a legitimate recommendation-is disregarded. As a result, the issuance of Notification No. 56/2023-CT, without a valid recommendation, may be deemed unlawful and could be subject to judicial invalidation due to its colorable nature.

1. Judicial Precedent and Quashing of the Notification:
   The Arkataki Print and Media Services vs Union of India & Ors file write petition in the High Court of Gauhati Case No. WP(C)/3585/2024 against order issued by the Respondent Authorities on the basis of the Notification No.56/2023-CT dated 28.12.2023 on the judgment of the Hon’ble Gauhati High Court in WP(C)/3585/2024, where Notification No. 56/2023-CT was held ultra vires and quashed as unsustainable in law.
2. Orders Issued Under Notification No. 56/2023-CT Dated 28.12.2023: Lack of Jurisdiction and Legal Invalidity

The GST Authorities, acting on the basis of Notification No. 56/2023-CT dated 28.12.2023, passed various orders under Section 73(9) of both the Central Goods and Services Tax (CGST) Act and the State Goods and Services Tax (SGST) Act. However, these orders are without jurisdiction as they were issued beyond the time limits prescribed under Section 73(10), making them legally unsustainable. The notification, which purported to extend the time limits for passing orders for FY 2018-19 and FY 2019-20, was issued without the necessary recommendation of the GST Council, as required by law.

The Hon\'ble Gauhati High Court in WP(C) No. 3585/2024, filed by The Arkataki Print and Media Services vs Union of India & Ors, ruled that Notification No. 56/2023-CT was ultra vires and quashed it as unsustainable in law. As a result, any orders passed based on this notification are without legal validity and must be quashed. Since the notification was declared void, the jurisdiction to pass such orders no longer exists, rendering these impugned orders unenforceable and null.

Therefore, the orders passed under the impugned notification must be quashed, as they have no legal foundation or authority under the CGST or SGST Acts.