GST time extension notifications under Section 168A quashed for invalid force majeure, lack of Council nod, limitation breach

HC held that N/Ns. 9/2023 and 56/2023 issued under Section 168A CGST Act, extending time for issuance of notices and orders under Section 73, are invalid. Section 168A, being an exception to the statutory limitation scheme, must be strictly construed, and a proximate force majeure cause (Covid-19) was not established or even recited. The mandatory requirement of a prior GST Council recommendation was not satisfied; later ratification of GIC's decision was insufficient. The notifications also diminished limitation contrary to SC's orders under Article 142, defeating the object of Section 168A. Consequently, the impugned notifications were quashed and all matters remanded to the assessing authority for fresh orders.

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Issues: (i) Whether notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 (extending time limits under Section 73) are conditional or delegated legislation and whether they must be strictly construed as exceptions to the statutory limitation scheme; (ii) Whether the recommendation of the GST Council is a mandatory pre-condition to issuance of notifications under Section 168A and whether post-facto ratification or recommendation by the GST Implementation Committee (GIC) suffices; (iii) Whether the GST Council/Government failed to take into account relevant materials and acted on a mistaken assumption of law (including the effect of the Supreme Court orders excluding 15.03.202028.02.2022 for computation of limitation), thereby vitiating Notification Nos.9/2023 and 56/2023; (iv) Whether orders of the Supreme Court under Article 142 excluding the period 15.03.202028.02.2022 continue to operate alongside or are superseded by notifications under Section 168A.

Issue (i): Whether notifications under Section 168A are conditional or delegated legislation and whether Section 168A/its notifications are to be strictly construed as exceptions to the limitation regime.

Analysis: Section 168A confers power on the Government, on the recommendation of the Council, to extend prescribed time limits in special circumstances where actions cannot be completed or complied with due to force majeure. Distinction between conditional and delegated legislation applies: extension of statutory limitation alters legislative policy and thus resembles delegated legislation. Section 73(2) and 73(10) embody legislative limitation policy for issuance of notices and orders; Section 168A operates as an exception to that policy and therefore calls for strict construction.

Conclusion: Section 168A and notifications issued thereunder are in the nature of delegated legislation and, being exceptions to statutory limitation, must be strictly construed; this conclusion favours the assessee.

Issue (ii): Whether recommendation by the GST Council is a mandatory pre-condition and whether ratification by the Council or recommendation by GIC post-issuance cures non-compliance.

Analysis: Section 168A requires issuance of notification "on the recommendations of the Council." The existence of a recommendation is a sine qua non for lawful exercise of the power; the GST Implementation Committee is not a substitute for the GST Council absent statutory delegation. Post-facto ratification or reliance on GIC recommendation that is later ratified does not satisfy the statutory prerequisite; statutory power conferred on a named body must be exercised on recommendation by that body unless express delegation exists.

Conclusion: Recommendation by the GST Council prior to issuance is mandatory; issuance without such recommendation or based only on GIC recommendation later ratified does not comply with Section 168A and disfavors the revenue.

Issue (iii): Whether the recommendations/notifications failed to take into account relevant materials and proceeded on a mistaken assumption of law (including the effect of Supreme Court orders), vitiating Notifications Nos.9/2023 and 56/2023.

Analysis: Condition precedent under Section 168A requires (a) existence of force majeure as defined, (b) actions "cannot be" completed or complied with, and (c) inability is "due to" force majeurei.e., force majeure must be the proximate/causa causans. Relevant materials (central OMs restoring normalcy by Feb 2022, Home Secretary D.O., CAG reports on systemic deficiencies and staffing, GST Council minutes) demonstrate that systemic deficiencies and staff shortagesmatters attributable to administrationwere principal causes of delay rather than force majeure in the proximate sense. The notifications further proceeded on an erroneous assumption as to the applicable limitation because the Supreme Court's exclusion (15.03.202028.02.2022) when applied results in a longer limitation period than that provided by the impugned notifications; thus the notifications effectively curtailed or diminished a larger limitation otherwise available, contradicting the object of Section 168A (which permits extension). Delegated legislation can be struck down for failure to consider vital relevant material or for being founded on mistaken legal assumptions; diminishing vested rights by curtailing a larger limitation is impermissible and may be arbitrary under Article 14.

Conclusion: The recommendations and Notifications Nos.9/2023 and 56/2023 failed to take into account relevant materials and proceeded on a mistaken assumption of law and fact; they are vitiated and therefore invalid, in favour of the assessee.

Issue (iv): Whether the Supreme Court orders under Article 142 excluding 15.03.202028.02.2022 cease to have effect upon introduction of Section 168A or issuance of the impugned notifications.

Analysis: Orders excluding a period operate on computation of limitation (exclusion) whereas notifications under Section 168A operate on the period of limitation (extension). The two concepts are distinct; exclusion under Article 142 adds days back into the available limitation period for pending proceedings and thus may provide a larger effective limitation than an executive extension that ignores the exclusion. Notifications under Section 168A cannot lawfully curtail or diminish a larger limitation already available through exclusion by the Supreme Court. The exclusion effected by the Supreme Court therefore continues to operate and coexists with statutory extensions; the impugned notifications that failed to account for the exclusion are founded on a mistaken assumption of law.

Conclusion: The Supreme Court orders excluding 15.03.202028.02.2022 continue to apply for computation of limitation and prevail in the present context, resulting in a larger limitation period than that effected by the impugned notifications; this conclusion favours the assessee.

Final Conclusion: Notification Nos.9/2023 and 56/2023 are invalid on multiple independent grounds (diminishing a larger limitation available due to Supreme Court exclusion; proceeding on an erroneous assumption of law; failure to consider relevant materials; and absence of GST Council recommendation prior to issuance in respect of Notification No.56/2023). The notifications are set aside and the authorities are directed to proceed afresh in accordance with law and with opportunity to the affected persons; the outcome is favourable to the assessee.

Ratio Decidendi: Where a statutory provision empowers the executive to extend limitation as an exception to a legislative scheme, that power is to be exercised on the statutory preconditions (including recommendation where required), the exception must be strictly construed, the executive must take into account relevant materials and may not act on a mistaken assumption of law or fact, nor may a delegated act diminish a larger limitation already available by operation of a valid judicial exclusion of time.

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