Madras HC Declares GST Extension Notifications Under Section 168A Unconstitutional

The extension GST notification issued under Section 168A of the CGST Act, 2017, which extended the time limit for adjudication, has been quashed by the Madras High Court.

The bench of Justice Mohammed Shaffiq ruled that the Notification No. 09/2023 has specified poor in law since its issuance was not occasioned via a force majeure event or any proximate cause thereof, as obligated u/s 168A. Based on the fact that Notification No. 56/2023 was issued without the GST Council’s suggestions therefore it has been quashed.

The GST Implementation Committee decision shall not be considered as a recommendation of the GST Council, as the committee is neither a regulatory nor a constitutional body, the bench ruled.

The validity of Notification No. 09/2023 and Notification No. 56/2023-Central Tax has been challenged by multiple petitions on 28.12.2023 issued u/s 168A of the Central Goods and Services Tax Act of 2017/Tamil Nadu Goods and Services Tax Act of 2017.

Volvo Auto Indi Private Limited the applicant, had submitted the writ petition contesting the Demand Order establishing the GST demand of Rs. 1,01,90,58,244 u/s 73 of the Central Goods and Services Tax Act, 2017/Tamil Nadu Goods and Services Tax Act, 2017 along with applicable interest and penalty for the period April 2019 to March 2020 and asking the applicant to deposit the amount by 27.11.2024. Under the extension granted for issuance of Orders by Notification 56/2023 dated 28.12.2023, the said Demand Order was issued.

The Petition has been filed by the applicant contesting the Notification No. 56/2023-Central Tax validity extending the time limit for issuance of Orders for FY 2019-20 upto 31.08.2024 issued purportedly under the guidance of the GST Council as being ultra vires Section 168A of the CGST/TNGST Act in as much as it unable to fulfil the requirements precedent as mentioned u/s 168A of the CGST Act i.e., before the suggestions of the GST Council, rendering it as conflicting with the provision as breached of Articles 14 and 19(1)(g) of the Constitution of India.

Senior Advocate, Mr. Sujit Ghosh, assisted by Advocates from CSG Legal – Ms Mannat Waraich and Ms Jaya Rishi, said that as per section 168A, the GST council recommendation is a pre-condition for the issuance of the impugned notification.

The mandate of the section is unfulfilled if it is not present. Also, the respondents’ justification for the post facto ratification of the impugned notification via the GST council in its 53rd Meeting on 22.06.2024 cannot be upheld. Hence, the Notification No. 56/2023 on 28.12.2023 violates Section 168A and is therefore not legal.

Notification does not meet the statutory mandate of a prior recommendation of the GST Council and is established on the decision of the GST Implementation Committee (GIC), which is only an administrative body and cannot be equated to the GST Counci,l which is a Constitutional body set up under Article 279A of the Constitution, Mr Ghosh cited. Post facto ratification of the GIC’s decision by the GST Council will not satisfy the regulatory mandate specified under section 168A.

Mr. Ghosh mentioned that the GST council’s suggestion was to act as a constraint on the authority furnished to the Delegatee to safeguard the same from the vice of excessive delegation, specifically where the Delegatee practices its authority towards limitation which touches on jurisdiction and hence could not be dealt with a casual way, Central Government must get GST council’s approval and under the scheme of plenary legislation, these recommendations are binding.

On the nation, the impugned notification is a fraud since on 28.12.2023, i.e., on the issuance date, the respondents ineffectively presented that the impugned Notification was established on the GST Council’s suggestions, whereas the Respondents by their acknowledgement accept the same was a post facto ratification.

The orders and notices have been set aside by the court, which emerges from these extension notifications, now held to be invalid in law, and has remanded all proceedings and orders passed under the notifications for fresh consideration. Regarding show cause notices (SCNs) issued under these notifications, the High Court has given the concerned taxpayers eight weeks to file their responses.