Analysis of the Limitation Period prescribed under Section 107 of the CGST Act, vis-à-vis applicability of Section 5 of the Limitation Act, 1963

Introduction:

There has been lot of controversy in respect to applicability of Section 5 of the Limitation Act, 1963 in context to limitation period provided under Section 107 of the CGST Act. The limitation period for filing appeals has sparked significant legal debate, particularly, referring to Section 5 of the Limitation Act, 1963, whether delays beyond the prescribed period can be condoned. In the present article an attempt has been made to provides a detailed analysis of the limitation period under Section 107, the applicability of Section 5, judicial interpretations and the current legal position as on date.

Section 107 of the CGST Act:

Section 107 of the CGST Act governs appeals to the Appellate Authority. Key provisions include:

• Section 107(1): Any person aggrieved by a decision or order under the CGST Act, may file an appeal within three months from the date of communication of the order.
• Section 107(4): The Appellate Authority may condone a delay upto one month, if sufficient cause is demonstrated by the Appellate for the delay.

Accordingly, the four months limit is there to ensure timely resolution of tax disputes. The strict timeline reflects the legislative intent to maintain certainty in tax administration.

Section 5 of the Limitation Act:

Section 5 of the Limitation Act allows courts to admit appeals or applications filed after the prescribed period, if the appellant shows sufficient cause for the delay. Further, Section 29(2) of the Limitation Act extends its provisions to special laws like the CGST Act unless explicitly excluded. Accordingly, the issue is whether Section 107 of the CGST Act explicitly excludes Section 5, thereby prohibiting condonation of delays beyond four months.

The Controversy:

The applicability of Section 5 of Limitation Act, in the context to Section 107 of CGST Act, has led to conflicting judicial interpretations, creating uncertainty among  taxpayers and legal practitioners. Therefore, the controversy is whether Section 107 is a self-contained code that excludes the Limitation Act.

Arguments Supporting Application of Section 5:

• No Express Exclusion: The CGST Act does not explicitly exclude the application of the Limitation Act. Section 29(2) of the Limitation Act, states that its provisions, including Section 5, apply to special laws unless expressly excluded.
• Access to Justice: Considering condonation of delay in the matters, ensures that genuine cases are not dismissed on technical grounds and justice is delivered. There could be legitimate obstacles, such as medical emergencies or procedural delays, which justify extension of the limitation period.
• Judicial Precedents: Courts have applied Section 5 to other special laws without express exclusions, supporting a liberal interpretation to promote fairness.

Arguments Against Application of Section 5:

• Legislative Intent: Section 107’s specific provision for a one-month extension indicates that the legislature intended to limit condonation to four months, excluding further extensions.
• Nature of Tax Laws: Tax statutes require strict timelines to ensure certainty and efficiency in revenue collection. Allowing indefinite extensions could disrupt fiscal administration.
• Supreme Court Precedents: In the cases like Singh Enterprises v. CCE and Hongo India (P.) Ltd. v. State of U.P., it is held that limitation periods in tax laws are strict and cannot be extended beyond the statutory limit.

Judicial Interpretations:

High Courts across India have issued divergent rulings, reflecting the complexity of the issue.

Calcutta High Court:

The Calcutta High Court has consistently held that Section 5 applies to Section 107, allowing delays beyond four months to be condoned if sufficient cause is shown:

• S.K. CHAKRABORTY & SONS VERSUS UNION OF INDIA & ORS. - 2023 (12) TMI 290 - CALCUTTA HIGH COURT: The court ruled that Section 107 does not expressly or impliedly exclude Section 5, citing Section 29(2) of the Limitation Act. The Appellate Authority was directed to consider condonation applications on their merits.
• EMARS MINING & CONSTRUCTION PRIVATE LIMITED VERSUS COMMISSIONER OF CGST & ANR. - 2024 (9) TMI 535 - CALCUTTA HIGH COURT: The court permitted the assessee to file a condonation application under Section 5, emphasizing fairness for taxpayers facing genuine delays.

Other High Courts:

Several High Courts have taken the opposite view, holding that Section 107 is a self-contained code that excludes Section 5:

• Allahabad High Court: In M/S YADAV SCRAP TRADERS HAVING OFFICE AT PALA VERSUS ADDITIONAL COMMISSIONER AND ANOTHER - 2024 (2) TMI 1359 - ALLAHABAD HIGH COURT, the court ruled that Section 107 implicitly excludes Section 5, as the CGST Act is a special statute with its own limitation mechanism. This was reinforced in Garg Enterprises v. State of U.P. (January 27, 2024).
• Delhi High Court: In M/s. R.K. Enterprises v. Commissioner of CGST (February 10, 2025), the court held that Section 107 prescribes an independent regime, making Section 5 inapplicable.
• Patna High Court: In M/s. S.K. Choudhary v. State of Bihar (June 21, 2024), the court ruled that the four-month limit is strict, citing Supreme Court precedents.
• Kerala High Court: In Penuel Nexus (P.) Ltd. (June 26, 2023), the court held that Section 107 impliedly excludes the Limitation Act, emphasizing the need for strict timelines in tax laws.

Supreme Court’s Intervention:

On August 30, 2024, in Joint Commissioner v. S.K. Chakraborty and Sons, the Supreme Court stayed the Calcutta High Court’s ruling, which had allowed Section 5’s application.

Case Summaries:

The following table summarizes key judicial rulings:

Current Legal Position:

As on date, the majority view from the Allahabad, Delhi, Patna, and Kerala High Courts is that Section 5 of the Limitation Act does not apply to Section 107 of the CGST Act. This means appeals must be filed within the four-month period, and delays beyond this are unlikely to be condoned. The Calcutta High Court’s contrary view, which allowed condonation, is currently stayed by the Supreme Court, creating uncertainty. The Supreme Court’s final decision could potentially allow more flexibility, but until then, the stricter interpretation prevails.

Practical Implications:

• Filing Deadlines: Taxpayers must file appeals within three months or seek a one-month extension with sufficient cause. Delays beyond four months are likely to be rejected outside West Bengal.
• Jurisdictional Variations: In West Bengal, the Calcutta High Court’s rulings may permit condonation, but the Supreme Court’s stay order limits their applicability.
• Monitoring Developments: Taxpayers and legal practitioners should stay updated on the Supreme Court’s decision, as it could significantly impact GST litigation.

Impact on Taxpayers and Legal Practitioners:

Due to uncertainty, in the legal interpretation about the applicability of Section 5 of the Limitation Act to Section 107 of the CGST Act,  it is suggested that Taxpayers must act promptly to meet the four months deadline, as missing it could result in dismissal of their appeals on a technical ground.

Conclusion:

The applicability of Section 5 of the Limitation Act in the context to CGST Act, is a critical aspect in GST litigation. The Calcutta High Court has supported condoning delay beyond four months under Section 5 of the Limitation Act whereas the majority of High Courts have taken contrary view. The Supreme Court stayed the operation of the Calcutta High Court’s ruling, which further introduce uncertainty. Accordingly, it is advised that appeals should be filed within the four months period.