Period from 15 March 2020 to 28 February 2022 excluded for limitation under s.73(2) and s.73(10) CGST

HC held that the period 15.03.2020 to 28.02.2022 is to be excluded while reckoning limitation under s.73(2) and (10) of the CGST Act and, in similar cases, remanded matters to the assessing authority for fresh adjudication. Where challenge is to an assessment/adjudication order, the impugned order shall be treated as a show-cause notice and petitioners given eight weeks from upload of the web copy to file objections; where challenge is to a notice, petitioners have eight weeks to file objections. Authorities must afford hearing and pass fresh orders on merits within six weeks of receipt of this order; petition allowed by remand.

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ISSUES PRESENTED AND CONSIDERED

1. Whether Notification Nos. 9/2023 and 56/2023 (Central/State) issued under Section 168A of the GST enactments are legally valid, having regard to the Supreme Court order under Article 142 that excluded the period 15.03.2020 to 28.02.2022 for limitation purposes.

2. Whether the impugned notifications impermissibly curtail or diminish limitation available to revenue authorities under Section 73(2) and (10) of the CGST Act by failing to give effect to the exclusion ordered by the Supreme Court.

3. Whether the impugned notifications suffer from arbitrariness or extinguish vested rights of the revenue authorities or taxpayers by proceeding on erroneous assumptions about the scope/effect of the Article 142 order.

4. Whether the issuance process of Notification No.56/2023 (and related notifications) complied with statutory requirements (role of GST Council vs. GIC and timing of recommendations) and whether failure to comply renders the notifications illegal.

5. Consequential question: the legal effect on existing assessment orders and notices issued pursuant to the impugned notifications, including whether such orders must be quashed and remitted for fresh adjudication, and procedure to be followed on remand (treatment as show-cause, opportunity to file objections and be heard).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of Notifications Nos. 9/2023 and 56/2023

Legal framework: Section 168A of the GST enactments governs issuance of notifications affecting limitation and related procedural matters; Section 73(2) and (10) concern time-barred recovery/assessment. The Supreme Court issued an order under Article 142 directing exclusion of the period 15.03.2020 to 28.02.2022 for limitation reckoning.

Precedent Treatment: The Principal Bench decision of this Court (referred to and followed) held that authorities under the CGST Act must give benefit of the exclusion period and declared Notification Nos. 9/2023 and 56/2023 vitiated for multiple reasons. That decision is applied to the present matters.

Interpretation and reasoning: The Court examined whether the impugned notifications operate consistently with the Supreme Court's Article 142 order. It found the notifications resulted in diminishing or curtailing the limitation which would otherwise be available by virtue of the Article 142 order, thereby defeating the object of Section 168A. The notifications proceeded on an erroneous assumption regarding the scope and effect of the Article 142 order and therefore were arbitrary.

Ratio vs. Obiter: Ratio - Notifications that curtail limitation conferred by a binding Article 142 order are invalid; Notification Nos. 9/2023 and 56/2023 are invalid for diminishing the exclusion period and for arising from erroneous legal assumptions. Obiter - ancillary observations on the impact of the notifications on vested rights and administrative practice.

Conclusion: Notification Nos. 9/2023 and 56/2023 are declared ultra vires and illegal for diminishing the limitation that flow from the Supreme Court order and for being founded on erroneous assumptions about that order.

Issue 2 - Whether the impugned notifications diminish limitation and extinguish vested rights

Legal framework: Limitation for assessment/recovery under Section 73(2)/(10) must account for judicially excluded periods; administrative action cannot extinguish vested rights of either revenue or taxpayer without lawful basis.

Precedent Treatment: The Court adopted the Principal Bench's clear finding that the impugned notifications curtailed limitation and extinguished vested rights and thus were arbitrary.

Interpretation and reasoning: The Court reasoned that by not giving effect to the exclusion mandated by the Supreme Court, the notifications effectively curtailed the period during which revenue could act; this extinguishment of a vested right of action (or presumed reliance) is arbitrary and contrary to the statutory object. The notifications' operation therefore suffers from the vice of arbitrariness and illegality.

Ratio vs. Obiter: Ratio - A notification that removes or diminishes limitation created or preserved by a superior court order, thereby extinguishing vested rights, is arbitrary and invalid. Obiter - observations on administrative consequences of such extinguishment.

Conclusion: The notifications are invalid to the extent they diminish limitation or extinguish vested rights; authorities must therefore reckon limitation after excluding 15.03.2020-28.02.2022 as directed by the Supreme Court.

Issue 3 - Validity of the recommendation/issuance process (GST Council vs. GIC and timing)

Legal framework: The statutory scheme contemplates specified bodies/consultative process (GST Council) for recommendations affecting GST matters; administrative compliance with statutory mandate governing issuance of notifications is mandatory.

Precedent Treatment: The Court followed the Principal Bench finding that Notification No.56/2023 was issued prior to GST Council recommendations and/or on the basis of GIC recommendations, which cannot substitute for the GST Council.

Interpretation and reasoning: The Court found procedural infirmity where the notification was issued relying on recommendations not lawfully substituting for the GST Council and where issuance preceded proper statutory consultation. The failure to comply with the statutory mandate in the issuance process rendered the notification illegal in addition to substantive flaws.

Ratio vs. Obiter: Ratio - Non-compliance with statutory consultative/ recommendation process in issuing notifications under Section 168A invalidates such notifications. Obiter - remarks on institutional competence of GIC vs. GST Council.

Conclusion: Notification No.56/2023 is invalid for procedural non-compliance (issued before GST Council recommendation and based on GIC recommendation) in addition to substantive invalidity.

Issue 4 - Consequences for existing assessment orders and notices issued pursuant to the impugned notifications; remedial procedure

Legal framework: Where foundational legislative/administrative instruments are declared invalid, downstream assessment orders premised on them may be vitiated and remittal for fresh adjudication is an available remedy; principles of natural justice (opportunity to be heard) and corrective procedure must be followed on remand.

Precedent Treatment: The Court applied the Principal Bench direction to remand matters to assessing authorities to pass fresh orders after affording opportunity to contest, treating impugned orders as show-cause notices where appropriate.

Interpretation and reasoning: Given the notifications' invalidity, assessment/adjudication orders founded thereon cannot stand. The Court directed quashing of impugned assessment orders and remand for fresh adjudication. The impugned order is to be treated as an addendum to the show-cause notice; petitioners must be allowed to file replies (six weeks in some instances; eight weeks as per the Principal Bench framework) and be heard before the authority passes fresh orders. The Court also identified that questions of natural justice, jurisdiction and errors apparent on the record should be re-examined by the assessing authority in light of this decision.

Ratio vs. Obiter: Ratio - Where notifications enabling assessment are invalid, consequent assessment orders must be quashed and remitted for fresh adjudication with full opportunity to be heard; impugned orders may be treated as show-cause notices for that purpose. Obiter - specific timelines and procedural directions are pragmatic directions tailored to the batch of matters.

Conclusion: Assessment orders and notices founded on the impugned notifications are quashed and remitted. Petitioners may file objections within the time directed; authorities shall pass fresh orders after hearing petitioners, and the exclusion of 15.03.2020-28.02.2022 must be applied in reckoning limitation.

Issue 5 - Ancillary issues: natural justice, jurisdiction, errors apparent on record

Legal framework: Principles of natural justice mandate notice and hearing before adverse orders; jurisdictional questions and patently erroneous decisions may require reconsideration by the authority on remand.

Precedent Treatment: The Court followed the Principal Bench in remanding issues of natural justice, jurisdiction and apparent errors for re-examination by assessing authorities.

Interpretation and reasoning: The Court observed that many petitioners' substantive submissions before the courts and authorities focused on jurisdictional challenges premised on the invalidity of notifications. Accordingly, those questions cannot be finally determined by the writ court but should be re-examined by the assessing authorities in fresh proceedings after giving parties an opportunity to be heard.

Ratio vs. Obiter: Ratio - Questions of natural justice, jurisdiction and apparent errors implicated by invalid foundational notifications should be re-examined by the assessing authority in fresh proceedings. Obiter - none material beyond direction to remand.

Conclusion: Authorities shall re-examine and decide issues of natural justice, jurisdiction and errors apparent on record in the course of passing fresh orders as directed on remand.

Overall Disposition and Directions (Consolidated)

The Court declared the impugned notifications ultra vires and illegal; applied the Principal Bench holding that authorities shall exclude 15.03.2020-28.02.2022 in reckoning limitation; quashed impugned assessment orders reliant on the notifications and remitted matters for fresh adjudication after giving petitioners specified time to file replies and after affording hearing; procedural non-compliance in issuance (GST Council/GIC/timing) was an additional ground of invalidity; no costs were awarded.

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