2025 (11) TMI 365 - HC - GST

Section 107(4) limitation held directory; appellate authority may condone delay if proper explanation furnished on reconsideration

Calcutta HC held that the limitation under Section 107(4) of the GST Act is directory and, in appropriate cases, the Appellate Authority may condone delay ... Condonation of delay in filing appeal - appeal filed beyond the maximum period prescribed u/s 107 of GST Act, 2017 - pre-SCN issued followed by an order u/s 74 - HELD THAT:- The decisions of SINGH ENTERPRISES [2007 (12) TMI 11 - SUPREME COURT] and HONGO INDIA PRIVATE LIMITED [2009 (3) TMI 31 - SUPREME COURT] are on the Central Excise Act, 1944, a completely different Act, as such the proposition of law laid down in the said two decisions is no pointer to the issue under consideration. The Hon’ble Division Bench of this Court in the case of S.K. CHAKRABORTY [2023 (12) TMI 290 - CALCUTTA HIGH COURT] has held that the time to file an appeal prescribed under Section 107(4) of the said Act of 2017 is not mandatory but directory in nature. The Hon’ble Division Bench of this Court in the case of PIJUSH KANTI CHOWDHURY [2007 (5) TMI 559 - CALCUTTA HIGH COURT] has held that the stay in a pending appeal before the Apex Court does not amount to any declaration of law but is only binding upon the parties to the proceedings. Having considered the aforesaid judgments and the materials-on-record, it is opined that the Appellate Authority, in appropriate cases, has the power to condone the delay in filing the appeal beyond the time prescribed under Section 107(4) of the said Act of 2017, subject to proper explanation being offered. The order impugned consequently the order of the Appellate Authority dated April 30, 2024 are set aside - Appellate Authority is directed to re-consider the prayer of the appellant for condonation of delay after giving the parties opportunity to bring the materials on record in support of their respective cases. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the time-limit prescribed by Section 107(4) of the Central Goods and Services Tax Act, 2017 for filing an appeal is mandatory (incontravertibly jurisdictional) or directory (allowing condonation of delay subject to explanation). 2. Whether precedents decided under the Central Excise Act (different statutory scheme) are applicable to determine the mandatory or directory nature of Section 107(4) of the 2017 Act. 3. The legal effect, for co-ordinate Benches and subsequent proceedings, of a Division Bench judgment of the High Court whose operation has been stayed by the Supreme Court: whether the stay obliterates the decision's value as a precedent. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Mandatory vs. Directory Nature of Section 107(4) (Condonation of Delay) Legal framework: Section 107(4) prescribes the time-limit for filing appeals under the 2017 Act. The question is whether the statutory time provision is jurisdictional (mandatory) so that any appeal filed beyond the period must be rejected irrespective of explanation, or directory so that condonation may be granted where sufficient cause is shown; this engages general principles on limitation and procedural rights to appeal and the applicability of the Limitation Act and equitable discretion. Precedent treatment: A Division Bench of this High Court in S.K. Chakraborty held that timelines in Section 107(4) are directory and the Limitation Act is applicable; another Division Bench in Ram Kumar Sinhal adopted the Chakraborty ratio and treated it as binding on co-ordinate Benches. The Single Judge relied on two Supreme Court decisions decided under the Central Excise Act to hold the time-limit mandatory; the Court distinguishes those precedents on statutory basis (see Issue 2). Interpretation and reasoning: The Court examined the statutory scheme of the 2017 Act and relevant High Court authorities, concluding that Section 107(4)'s timelines are not inherently jurisdictional. The Court reasoned that, in appropriate cases, the appellate authority possesses discretion to condone delay beyond the prescribed period on being satisfied with adequate explanation and materials. The Court relied on co-ordinate Division Bench authority affirming the directory character and on reasoning that an interim stay of that authority in a separate proceeding does not eliminate its precedential value for co-ordinate Benches. Ratio vs. Obiter: The holding that Section 107(4) is directory and that the Appellate Authority may condone delay (subject to satisfactory explanation) is treated as ratio of the Court's decision and is applied to set aside the impugned order. Observations distinguishing other statutes and on procedural application of the Limitation Act are integral to the ratio. Ancillary remarks on procedural steps for re-consideration are directive and operative. Conclusion: The Court concludes that Section 107(4) of the 2017 Act is directory in nature. The Appellate Authority has the power to condone delay beyond the statutory period in appropriate cases after assessing explanations and material; the impugned order refusing condonation solely because the appeal was filed beyond four months was set aside and the matter remitted for fresh consideration. Issue 2 - Applicability of Central Excise Precedents Legal framework: Determination whether jurisprudence developed under a distinct enactment (Central Excise Act) bears directly on interpretation of time-limits and condonation provisions under the 2017 Act. Precedent treatment: The Single Judge relied on two Supreme Court decisions under the Central Excise Act to deny condonation; the present Bench considered those authorities but held they are decisions under a different statutory scheme. Interpretation and reasoning: The Court distinguished the Central Excise precedents on the ground that they arose under a completely different Act with its own statutory framework and therefore are not decisive on the construction of Section 107(4) of the 2017 Act. The Court emphasised that principles derived from one statute are not automatically portable to another where legislative scheme and provisions differ materially. Ratio vs. Obiter: The distinction drawn between statutory schemes and the resulting non-application of Central Excise authorities to the 2017 Act is part of the Court's core reasoning and forms part of the operative ratio displacing reliance on those precedents for the present issue. Conclusion: Precedents under the Central Excise Act do not control the issue of condonation under Section 107(4) of the 2017 Act; they were rightly held inapplicable for determining whether the time-limit is mandatory or directory in the statutory context before the Court. Issue 3 - Effect of Supreme Court Stay on High Court Division Bench Precedent Legal framework: The effect of an interim stay by the Supreme Court of a High Court judgment on the precedent value of that High Court judgment for co-ordinate Benches and subsequent proceedings; principles of stare decisis and binding precedent among co-ordinate Benches. Precedent treatment: The Court relied on existing High Court authority (Pijush Kanti Chowdhury) and on the reasoning in Ram Kumar Sinhal which took note of the stay but nevertheless followed the ratio in the Division Bench decision (S.K. Chakraborty). Interpretation and reasoning: The Court reasoned that an interim stay granted by the Supreme Court in a proceeding is binding only between the parties to that proceeding and does not amount to a declaration that the High Court judgment is legally incorrect or obliterate its value as precedent for co-ordinate Benches. The mere fact of a stay does not amount to a binding pronouncement altering the law; until the higher court conclusively decides on merits, the High Court's ratio remains persuasive and binding on co-ordinate Benches under principles of precedent. Ratio vs. Obiter: The proposition that a stay of operation in a specific appeal does not negate the precedential value of the underlying High Court ratio is treated as binding reasoning applied by the Court; this principle was applied to justify reliance on the Division Bench authority despite the stay. Conclusion: A Supreme Court stay of the operation of a High Court judgment in proceedings between the parties does not destroy the judgment's precedential value for co-ordinate Benches; therefore the Division Bench ratio holding Section 107(4) directory remains binding on co-ordinate Benches and relevant for resolving the present dispute. Remedial Direction and Outcome Having held Section 107(4) to be directory and that the Appellate Authority may condone delay, the Court set aside the Appellate Authority's order refusing condonation solely on the basis of delay and remanded the matter. The Appellate Authority was directed to re-consider the condonation application after affording parties opportunity to produce materials and explanations; the appeal process was ordered to proceed without any order as to costs.