Madras High Court Declares GST Notification 56/2023 Illegal - What Taxpayers & Consultants Must Know

Case Details 

Petitioner:                M/S.SKT Swamy Auto Agency.

Case No:                    W.P.Nos.4562 & 4565 of 2025

Court:                                    Madras High Court

Order Date:             12-06-2025

Respondent:            Additional Solicitor General (ASG)

Introduction

In a significant ruling, the Madras High Court has quashed GST Notification No. 56/2023 - Central Tax dated 28.12.2023, declaring it arbitrary, ultra vires, and void. This notification attempted to extend the limitation period for issuing orders under Section 73 of the CGST Act, 2017 without any valid justification as required under Section 168A.

The decision is based on the Court’s earlier ruling in the Tata Play Ltd. case, and it has far-reaching implications for GST assessments, adjudication, and taxpayers’ rights.

Background of the Case

Notification No. 56/2023 was issued by the Central Board of Indirect Taxes and Customs (CBIC) under Section 168A of the CGST Act.

It aimed to extend the statutory time limits for issuing orders under Section 73 (cases without fraud or suppression).

Timeline Extensions Provided

For Financial Year 2018-19: Extended to 30 April 2024.

For Financial Year 2019-20: Extended to 31 August 2024

These extensions superseded earlier ones provided under older notifications (like Nos. 35/2020, 14/2021, 13/2022 and 09/2023)

Multiple taxpayers challenged the notification and the resulting orders (in Form GST DRC-07) before the Madras High Court.

The primary contention: No exceptional circumstances existed at the time of issuance to justify such an extension.

Relevant Legal Provisions

Section 73 - CGST Act, 2017

Determination of tax not paid, short-paid, or wrongly availed ITC without fraud, with a limitation period of 3 years from the due date of filing the annual return.

Section 168A - CGST Act, 2017

Allows the Government to extend time limits only in case of exceptional circumstances such as:

War, Epidemic, Natural calamity, Other similar force majeure events

Constitutional Articles

Article 14 - Equality before law (prohibits arbitrary state action)

Article 19(1)(g) - Right to practice any profession or trade

Article 21 - Right to life and personal liberty (includes fair legal process)

Court’s Findings

No Exceptional Circumstances

• Section 168A can only be invoked during exceptional situations like war, epidemic, or natural disaster.
• At the time of Notification No. 56/2023, none existed.

Cannot Revive Time-Barred Proceedings

• The notification attempted to legally revive proceedings that were already barred by limitation.
• This goes beyond the powers granted by the statute.

Conflict with Supreme Court’s Order

• The Apex Court had extended limitation during COVID (15.03.2020 to 28.02.2022) using its powers under Article 142.
• Executive notifications cannot shorten or override that benefit.

Reliance on Tata Play Case

• The Court reiterated that Notifications 9/2023 and 56/2023 issued under Section 168A were unsustainable for the same reasons.

Court’s Directions

• Orders already issued (Form GST DRC-07) → Will now be treated as Show Cause Notices.

• Taxpayers have 8 weeks from the date of upload of the order’s web copy to file objections.
• The GST authorities must then pass fresh orders after granting a hearing.
• For cases where only a notice was challenged, taxpayers also have 8 weeks to reply.

Main Arguments, Court Findings, and Court Decisions

Petitioners’ Contentions

Ultra vires to Section 168A of CGST Act
The notification was issued without the existence of exceptional circumstances such as war, epidemic, or natural calamity - conditions mandatory under Section 168A.

Violation of Constitutional Rights Claimed infringement of:

Article 14 - Equality before law (protection from arbitrary executive action)

Article 19(1)(g) - Right to practice any profession or trade

Article 21 - Right to life & personal liberty, which includes fair legal process.

Revival of Time-Barred Cases
Alleged that the notification unlawfully revived proceedings already barred by limitation.

Conflict with Supreme Court Orders
Asserted that the Supreme Court’s COVID-19 limitation extension (15.03.2020-28.02.2022) under Article 142 could not be curtailed or overridden by an executive notification.

Reliance on Tata Play Ltd. Decision
Argued that the same reasoning in Tata Play Ltd. applied here - prior similar notifications (Nos. 09/2023 & 13/2022) were already held unsustainable.

Respondents’ (GST Department) Position

Authority under Section 168A
Claimed that the Government was empowered to extend limitation periods and that the notification was within this scope.

Administrative Necessity
Stated the extension was needed to complete pending adjudications.

Court’s Findings

No Exceptional Circumstances at Time of Issue

• Section 168A empowers the Government to extend time only under specific exceptional situations.
• On 28.12.2023, no such war, epidemic, or natural disaster existed.

Cannot Revive Time-Barred Proceedings

Extension cannot be used to reopen or “revive” cases already barred by limitation under Section 73.

Executive Action Cannot Override Supreme Court’s Order

• The Apex Court’s order under Article 142 had already excluded the COVID period for limitation purposes.
• Executive notifications cannot shorten or redefine that benefit.

Binding Effect of Tata Play Ruling

The reasoning in Tata Play Ltd. applies squarely - Notification 56/2023 suffers the same legal defects.

Notification Declared Void

Found to be arbitrary, ultra vires, and illegal.

Court’s Final Decision & Directions

Quashing of Notification
GST Notification No. 56/2023 - Central Tax dated 28.12.2023 was struck down.

Treatment of Issued Orders

• All assessment orders already issued (Form GST DRC-07) will be treated as Show Cause Notices.
• Taxpayers given 8 weeks from the date of web upload of this order to file objections.

Further Adjudication

GST authorities to pass fresh orders only after granting personal hearing.

Notices under Challenge

Where only a notice was challenged, taxpayers have 8 weeks to respond.

Impact on Taxpayers

• Protects taxpayers from arbitrary reopening of GST cases.
• Reinforces that limitation periods cannot be casually extended.
• Provides an opportunity to recontest and close invalid proceedings.

Action Plan for Taxpayers & Consultants

1. Identify all GST orders/notices issued citing Notification 56/2023. Deadline:     

2. Draft detailed objections citing Madras HC & Tata Play judgments. 

3. Preserve evidence of timelines & limitation expiry. 

4. Prepare for personal hearings with legal grounds. 

5. Maintain record of all submissions & orders. 

Preventive Measures for the Future

• Always track limitation deadlines for GST proceedings.
• Keep updated on judicial rulings affecting statutory timelines.
• Train internal tax teams and maintain legal documentation to defend against time-barred demands.

Conclusion

The Madras High Court’s decision serves as a reminder that executive powers have limits and statutory safeguards must be respected. Taxpayers and GST practitioners should leverage this ruling to safeguard their rights, while also ensuring compliance within statutory timeframes.