Assessment order quashed under Tamil Nadu GST Act for 2017-18; reassessment directed under Section 168A

The HC quashed the impugned assessment order dated 28.12.2023 under the Tamil Nadu GST Act for the assessment year 2017-18 and remitted the matter to the assessing authority for fresh consideration. The decision followed the Principal Bench's ruling in a related batch of cases, which directed reassessment in light of issues concerning retrospective effect under section 168A. The petition was allowed, and the assessing authority was directed to pass a fresh order on merits within three months of receiving the court's order.

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1. ISSUES PRESENTED and CONSIDERED

1. Whether Notification No.09/2023 - Central Tax, dated 31.03.2023, and the corresponding State notification under Section 168A of the Tamil Nadu Goods and Services Tax Act, 2017, operate retrospectively and are ultra vires the provisions of the Central Goods and Services Tax Act, 2017.

2. Whether the impugned notifications and consequential assessment order violate Articles 14 (Right to Equality), 246A (Legislative power with respect to Goods and Services Tax), and 265 (No tax to be levied or collected except by authority of law) of the Constitution of India.

3. Whether the impugned notifications diminish or curtail the limitation period for initiating proceedings under the CGST Act contrary to the Supreme Court's order under Article 142 of the Constitution.

4. Whether the impugned notifications suffer from arbitrariness and extinguish vested rights of action available to authorities under the CGST Act.

5. Whether the impugned notifications were issued without proper statutory mandate, including failure to comply with GST Council recommendations, and whether recommendations of the Goods and Services Tax Implementation Committee (GIC) can substitute for GST Council recommendations.

6. Whether the principles of natural justice, jurisdictional limits, and absence of errors apparent on the face of the record were violated in the assessment proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Retrospective Operation of Notifications under Section 168A of the Tamil Nadu GST Act

- Legal Framework and Precedents: Section 168A of the CGST Act provides for extension of limitation periods for assessment and related proceedings. The Supreme Court's order under Article 142 excluded the period from 15.03.2020 to 28.02.2022 from limitation calculations due to the COVID-19 pandemic.

- Court's Reasoning: The impugned Notification No.09/2023 and corresponding State notification purported to curtail or diminish the limitation period by not excluding the pandemic period, effectively operating retrospectively to the detriment of taxpayers. This retrospective operation was held to be ultra vires Section 168A, which aims to extend limitation, not curtail it.

- Application of Law to Facts: The notifications ignored the Supreme Court's binding order excluding the pandemic period, thereby shortening the limitation period unlawfully.

- Conclusion: The notifications cannot operate retrospectively to diminish limitation and are ultra vires Section 168A of the CGST Act.

Issue 2: Violation of Constitutional Provisions (Articles 14, 246A, and 265)

- Legal Framework: Article 14 ensures equality before law; Article 246A vests legislative competence over GST; Article 265 mandates that no tax shall be levied or collected except by authority of law.

- Court's Reasoning: The impugned notifications, by curtailing limitation retrospectively and without proper statutory authority, violate Article 265. The arbitrary curtailment of limitation and extinguishment of vested rights violate Article 14. The notifications also bypassed the legislative framework under Article 246A by failing to comply with the GST Council's mandate.

- Conclusion: The impugned notifications violate Articles 14, 246A, and 265 of the Constitution.

Issue 3: Curtailment of Limitation Contrary to Supreme Court Order under Article 142

- Legal Framework: The Supreme Court's order under Article 142 excluded the period 15.03.2020 to 28.02.2022 from limitation calculations under Sections 73 and 74 of the CGST Act.

- Court's Reasoning: The impugned notifications failed to give effect to this exclusion, thereby diminishing the limitation period available to tax authorities. This resulted in extinguishing vested rights of action and was held to be arbitrary and contrary to the object of Section 168A.

- Conclusion: The notifications are vitiated for diminishing limitation and are contrary to the Supreme Court's order under Article 142.

Issue 4: Arbitrariness and Extinguishment of Vested Rights

- Court's Reasoning: By curtailing limitation and ignoring the Supreme Court's order, the notifications extinguished vested rights of tax authorities to initiate proceedings within the prescribed time. This arbitrary action lacks legal basis and violates principles of fairness.

- Conclusion: The notifications suffer from arbitrariness and extinguish vested rights, rendering them invalid.

Issue 5: Failure to Comply with Statutory Mandate and Role of GST Council vs. GIC

- Legal Framework: The GST Council is the statutory body empowered to recommend changes in GST law and notifications.

- Court's Reasoning: The impugned notifications were issued without proper recommendations from the GST Council. In particular, Notification No.56/2023 was issued prior to GST Council recommendations and relied instead on recommendations from the Goods and Services Tax Implementation Committee (GIC), which cannot substitute for the GST Council.

- Conclusion: Failure to comply with the statutory mandate and reliance on GIC recommendations render the notifications illegal.

Issue 6: Principles of Natural Justice, Jurisdiction, and Errors Apparent on Record in Assessment Proceedings

- Court's Reasoning: The Court noted that issues relating to violation of natural justice, lack of jurisdiction, and errors apparent on the face of the record require re-examination by the assessing authority. The petitioner's challenge primarily related to jurisdiction based on the invalidity of the notifications.

- Application: The Court directed remand of the assessment proceedings to the assessing authority for fresh consideration, treating the impugned assessment order as an addendum to the show cause notice, and providing the petitioner opportunity to file objections and be heard.

- Conclusion: The assessment order was quashed and remanded for fresh adjudication after affording opportunity of hearing, in line with principles of natural justice and jurisdictional propriety.

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