This Tax Alert summarizes a recent ruling of the Gauhati High Court (HC)[1] on the validity of notifications extending the time limit to pass order under section 73(10) of Central Goods and Services Tax Act, 2017 (CGST Act).
The key observations of the HC are:
- Since the orders under dispute were passed basis the extension provided by Notification no. 56/2023 (the Notification), the Court is not considering challenge to Notification No. 9/2023 (earlier extension notification).
- There is no denial to the fact that the Notification was issued without the recommendation of the GST Council.
- In the Notification, the Central Government for reasons best known, mentioned “on the recommendations of the Council”, which on the face of it shows that the exercise of power by the Government insofar as the Notification is concerned, is a colourable exercise of power.
- Since the Notification was issued without the recommendation, GST Council had no occasion to consider existence of force majeure.
- Recommendations to be made by the GST Council if required as per the provisions of the Central Act or the State Act has to be construed to be a “sine qua non” for exercise of power by the Union or the State Government.
Accordingly, the Court held that the Notification is ultra vires the CGST Act and not legally sustainable in law.
However, since the Government has the power to issue retrospective notification as per section 168A(2), the Court mentioned that this decision shall not prejudice the Government to take such steps in the manner provided under law.
Comments
- While the ruling provides relief to the taxpayers, tax department is likely to litigate the matter before the apex court.
- It needs to be seen whether the law makers initiate action by issuing notifications with retrospective effect for such extensions once the GST Council makes recommendation in subsequent meetings.
- It is relevant to note that both Notification 56/2023-CT and Notification no. 9/2023-CT are challenged in multiple writs before various High Courts.
- The ruling highlights interpretation of the term ’recommendation’ in the context of GST law.
- The taxpayer needs to analyse the impact of this decision by identifying the cases where order has been passed basis the extension provided by the Notification.
[1] TS-588-HC(GAUH)-2024-GST
