WHY THE EXTENDED PERIOD OF LIMITATION CANNOT BE INVOKED AGAINST GOVERNMENT UNDERTAKINGS — A WASTED EXERCISE UNDER GST By G. Jayaprakash, Advocate (Former Central Excise Officer)

1. The Extended Period – A Weapon, not a Routine Tool

In every fiscal enactment — Section 11A(4) of the Central Excise Act, Section 73(4) of the Finance Act, 1994, and now Section 74 of the CGST Act, 2017 — Parliament allowed the extended period of limitation only in cases of fraud, suppression, or willful misstatement with intent to evade tax.

It is a penal provision meant for deceit, not delay.

Yet, in practice, it has become a habitual crutch — invoked even against Public Sector Undertakings and Government departments, where deceit by one arm of the State against another is conceptually impossible.

2. Can the State Evade Its Own Revenue?

A Government undertaking functions as an instrumentality of the State, accountable to Parliament, the CAG, and multiple audits. To allege “suppression” against such an entity is to suggest that the State has conspired against itself.

Courts have repeatedly called out this contradiction:

• M/s. STEEL AUTHORITY OF INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAIPUR - 2019 (5) TMI 657 - Supreme Court— suppression cannot be attributed to a PSU.
• Oil India Ltd. v. CCE, 2014 (300) E.L.T. 218 (Tri.-Del.) — intention to evade cannot be presumed in a Government-owned company under audit.
• Hindustan Aeronautics Ltd. v. CCE, 2003 (161) E.L.T. 1117 (Tri.-Bang.) — invoking the extended period against HAL was “a logical absurdity.”

The law presumes bona fides in governance, not self-inflicted deceit.

3. Audit and Disclosure – The Antidote to Suppression

PSUs live in a glass house of audits — internal, statutory, and CAG. Departmental officers often sit within the same premises and receive regular data.

When everything is on record, the very foundation of “suppression” crumbles.

ONGC v. CCE, 2006 (198) E.L.T. 481 (Tri.-Del.) recognized this: any short levy by ONGC arose from interpretation, not concealment.

4. Interpretation Disputes Are Not Evasion

Differences in legal opinion — whether a supply is exempt or taxable, or how valuation applies — are interpretative, not criminal.

In NTPC Ltd. v. CCE, 2017 (51) S.T.R. 158 (Tri.-Del.), the Tribunal held that mere difference of view cannot justify the extended period.

Tax law cannot convert honest doubt into fraud.

5. The Mutuality Paradox

When both taxpayer and tax collector are limbs of Government, invoking extended limitation becomes a case of mutual accusation.

In Collector v. Indian Oil Corporation, 2002 (150) E.L.T. 324 (Tri.-Del.) and CST v. BSNL, 2018 (9) G.S.T.L. 364 (Tri.-Del.), the Tribunals observed that one Ministry cannot allege suppression against its own undertaking.

It is a bureaucratic illusion that satisfies files, not fairness.

6. GST and the “Saving-Skin Syndrome”

The GST regime, instead of learning from the past, has perfected a new bureaucratic reflex — the “Saving-Skin Syndrome.”

When audit objections or internal reviews raise a query, officers mechanically issue Section 74 notices alleging “suppression,” not because suppression exists, but because it protects them from audit blame.

This culture of defensive administration converts a bona fide interpretative issue into a “fraud case,” just to cover the file and save the skin of the officer who fears being questioned later.

Thus, the extended period becomes not an instrument of justice, but a shield for administrative anxiety.

The result is predictable:

• PSUs spend crores defending obvious cases.
• Tribunals spend years quashing them.
• Officers escape responsibility by citing “process compliance.”

The only casualty is public time and trust.

7. The Real Cost of “Saving Skin”

Every needless notice is an admission that governance has been replaced by file management.

The Energy Boards, Port Trusts, State Transport Corporations, and PSU refineries have become soft targets, not because they hide data, but because they can’t retaliate.

In reality:

• Manpower is drained from genuine evasion detection.
• Litigation costs multiply for both sides.
• Faith in GST administration erodes.

The “saving-skin” instinct may protect one officer for a while, but it ultimately burns the institution.

8. A Policy Reset for GST 2.0

For GST 2.0 to earn credibility, the CBIC must institutionalize restraint:

• Use Section 73 for interpretational or audit differences.
• Reserve Section 74 strictly for fraud supported by evidence.
• Record internal responsibility for mechanical invocation of the extended period.
• Only then will “ease of doing business” mean ease for the Government itself.

9. A Final Word of Caution

A good tax system is judged not by how aggressively it demands, but by how reasonably it behaves.

When the State accuses its own undertakings of suppression, it is not enforcing law — it is displaying insecurity.

If GST officers continue to invoke Section 74 merely to save their skins, they will only prove that the real suppression is that of logic, reason, and public faith.

The extended period is a sword meant for the guilty; in the hands of the fearful, it merely cuts the Government’s own credibility.