2024 (6) TMI 229 - HC - GST

Show Cause Notice Under CGST Act 2017 Issued Beyond Limitation; No Tax Levied, No Deposit Required for Appeal.

M/s. Fluentgrid Limited Versus The Additional Commissioner Of Central Tax and Others

The HC determined that the impugned order and show cause notice under the C.G.S.T. Act 2017 were issued beyond the limitation period, as the three-year ... Challenge to impugned order u/s 73(9) of C.G.S.T. Act 2017 and show cause notice u/s 73(1) - time limitation for assessment year 2017-18 - HELD THAT:- As the ground of challenge is that initiation of the proceedings is beyond the period of limitation as also extended period as the show cause notice was not issued inconsonance in the provisions of Section 73(2) and as such the order is within the jurisdiction and no tax would be levied. No cause is made out at this stage for direction to the petitioner to make any deposit. List on 22.04.2024. ISSUES PRESENTED AND CONSIDERED 1. Whether the period of limitation for initiation of proceedings under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) is to be computed from the 'due date' for filing the annual return or from the 'actual date' of filing the annual return. 2. Whether a notification issued under Section 168A of the CGST Act, extending limitation periods, can validate initiation of proceedings that are otherwise time-barred when the notification does not expressly invoke or identify 'force majeure' circumstances. 3. Whether, in the exercise of interlocutory relief in writ proceedings challenging assessment/show-cause notices under Section 73, the Court should direct deposit of 10% of the disputed tax (for filing an appeal under the statute) as a condition for interim protection. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Computation of limitation: 'due date' v. 'actual date' of filing annual return Legal framework: Section 73 of the CGST Act prescribes time limits for issuance of show-cause notices for recovery of tax not paid to the credit of the Central or State Government. The limitation period is statutorily defined with reference to particular triggering dates related to returns; the distinction between 'due date' and 'actual date' of filing is central to computing the applicable limitation. Precedent Treatment: The Court noted that other High Courts have entertained challenges on similar grounds and granted interim relief (cited courts in the judgment), indicating judicial attention to the 'due date' vs. 'actual date' question in closely analogous contexts. Interpretation and reasoning: The Court, on preliminary consideration, found force in the submission that the plain statutory language and scheme indicate that the relevant date for limitation purposes is the 'due date' for filing returns rather than the 'actual date' of filing. The Court treated the statutory provisions and their plain meaning as decisive at the prima facie stage. Ratio vs. Obiter: The observation that limitation is to be computed from the 'due date' was treated as prima facie conclusion based on statutory language and formed the basis for interim protection; it functions as the operative ratio for the interlocutory order but is subject to fuller consideration on pleadings and affidavits. Conclusions: Prima facie, limitation should be computed from the 'due date' for filing returns; the petitioner's challenge that initiation of proceedings beyond the extended period (as calculated from the due date) is time-barred appears to have merit for interim purposes. (See cross-reference to Issue 2 regarding saving by notification.) Issue 2 - Validity and scope of notification under Section 168A to extend limitation absent express 'force majeure' Legal framework: Section 168A permits the Central Government to issue notifications to extend statutory time-limits in certain circumstances; the Court considered whether such power can be exercised to cure time-barred actions when the notification itself does not specify force majeure or similar disabling circumstances. Precedent Treatment: The Court referred to decisions of other High Courts that entertained writs challenging similar notifications/orders, suggesting a trend of judicial scrutiny of the validity and scope of Section 168A notifications when relied upon to revive or extend limitation. Interpretation and reasoning: The petitioner's contention - accepted prima facie by the Court for the purposes of interim relief - is that a notification under Section 168A can be validly issued only when conditions like 'force majeure' prevented completion of actions within statutory periods, and that a notification failing to identify such circumstances cannot legitimately extend limitation to validate otherwise time-barred notices/orders. The Court refrained from finally deciding the legal vires of the notification but indicated that the notification dated 31.03.2023 (in the companion case) is itself under challenge and that its scope to cure limitation remains open to scrutiny. Ratio vs. Obiter: The Court's remarks on the limits of Section 168A and the requirement of identifying force majeure are prima facie and form part of the reasoning for granting interim relief. They are not a final adjudication on the vires of any specific notification. Conclusions: At the interlocutory stage, the contention that a Section 168A notification which does not specify force majeure or comparable disabling circumstances cannot be invoked to validate time-barred proceedings has prima facie force; the validity of such notification requires fuller adjudication on affidavits and pleadings. Issue 3 - Requirement of deposit (10% of disputed amount) as condition for interim relief Legal framework: The statute provides an appeal mechanism against orders under the CGST Act and contemplates conditions (including deposit requirements) for filing appeals; courts often balance statutory appeal requirements and equitable relief in writ jurisdiction. Precedent Treatment: The Court referred to the statutory appealability and deposit requirement as a ground advanced by respondents to urge payment/deposit by the petitioner pending challenge. Interpretation and reasoning: The Court observed that the petitioner's central challenge goes to the jurisdictional vires of the proceedings (that they are time-barred and therefore without jurisdiction and no tax can be levied). Given that the primary contention is jurisdictional, the Court found no cause, at the interlocutory stage, to direct the petitioner to make any deposit out of the disputed amount pending adjudication. The Court balanced the statutory appeal deposit regime against the petitioner's plea that the impugned action is void ab initio. Ratio vs. Obiter: The direction that no deposit be ordered pending further consideration was an interlocutory order based on the Court's prima facie view on jurisdictional challenge; it is binding as an interim measure but not a final determination on entitlement to relief. Conclusions: No interlocutory direction for deposit (10% or otherwise) was made; the Court declined to require deposit where a serious jurisdictional limitation challenge was raised and prima facie established. Procedural and remedial steps ordered (connected to the issues above) Legal framework and reasoning: Given contested factual and legal issues (computation of limitation, validity of Section 168A notification), the Court ordered filing of counter-affidavit and permitted reply/rejoinder within stipulated time frames, deferred final adjudication, and stayed coercive action pursuant to the impugned order until the next list date. These procedural steps reflect the Court's approach to preserve the status quo while permitting full canvass of issues. Conclusions: Interim protection granted - no coercive action to be taken pursuant to the impugned order until the next listing; written pleadings and affidavits to be exchanged to enable full adjudication on merits concerning limitation computation and the validity/scope of any Section 168A notification. Cross-reference: the stay and non-requirement of deposit are premised on the prima facie view on Issues 1 and 2.