AMIT BAJAJ ADVOCATE

In a significant ruling, the Gauhati High Court, in the case of Mahabir Tiwari v. Union of India, has set aside and quashed Notification No. 56/2023-Central Tax, dated December 28, 2023. This notification, which extended the time limit for issuing orders under Section 73(10) of the Central Goods and Services Tax (CGST) Act for the financial years 2018-19 and 2019-20, was deemed "ultra vires" (beyond legal power) due to the absence of a recommendation from the Goods and Services Tax (GST) Council.

The petitioner, Mahabir Tiwari, challenged the validity of the said notification, arguing that the extension of the limitation period for proceedings under Section 73 was invalid as it was done without the mandatory recommendation of the GST Council and without considering any "force majeure" conditions. The petitioner's firm had faced a demand of Rs. 1,20,01,973 based on an order passed on August 29, 2024, following the challenged extension.

The Core of the Legal Challenge: Section 168A and GST Council's Role

The crux of the matter revolved around Section 168A of the CGST Act, 2017, which grants the Government the power to extend time limits in special circumstances. Crucially, this power can only be exercised "on the recommendations of the GST Council by notification" and specifically for "actions which cannot be completed or complied with on account of force majeure". The petitioner contended that there was no force majeure as required under Section 168A for the extensions granted.

The High Court observed that Notification No. 56/2023-Central Tax, dated December 28, 2023, which extended the limitation for financial year 2018-19 until April 30, 2024, and for financial year 2019-20 until August 31, 2024, was issued without the recommendation of the GST Council.

Precedent and Judicial Reasoning

The court heavily relied on a similar case, Barkataki Print and Media Services v. Union of India, where a Coordinate Bench of the same High Court had already ruled Notification No. 56/2023-Central Tax to be ultra vires for the very same reason – being issued without the GST Council's recommendation.

In its detailed reasoning, the Gauhati High Court affirmed that the term "on the recommendation of the Council" in Section 168A implies that such a recommendation is a "sine qua non" or an essential prerequisite for the Government to exercise its power to extend timelines. The court cited the Supreme Court's observations in V.M. Kurian v. State of Kerala, emphasizing that the meaning of "recommendation" must be understood in the context of the rules and their objectives, signifying a "favourable report".

The judgment further delved into the constitutional framework of GST, particularly Articles 246A and 279A, highlighting the unique cooperative federalism inherent in the GST regime. The court clarified that while not all recommendations of the GST Council may be binding, the specific wording of Section 168A makes the existence of a recommendation a mandatory condition for exercising delegated legislative power. The court noted that the Central Government's admission of no recommendation from the GST Council, while still stating "on the recommendations of the Council" in the notification, amounted to a "colourable exercise of power".

Furthermore, the court found that the "force majeure" condition, which is a prerequisite for extensions under Section 168A, was not considered by the GST Council before the issuance of Notification No. 56/2023-Central Tax.

Outcome and Implications

In light of these findings, the Gauhati High Court concluded that Notification No. 56/2023-Central Tax was indeed ultra vires the Central Act and legally unsustainable. Consequently, the Demand-cum-Show Cause Notice dated May 30, 2024, and the subsequent Order-in-Original dated August 29, 2024, issued against Mahabir Tiwari, were also set aside and quashed, as they were based on an invalid extension of the limitation period.

This judgment reinforces the critical role of the GST Council in the Indian indirect tax system, underscoring that the Government's power to extend time limits under Section 168A is not unfettered but is contingent upon the specific recommendations of the Council and the presence of force majeure conditions. It provides significant relief to taxpayers affected by extensions issued without adherence to these statutory requirements.

Mahabir Tiwari vs. Union of India [2025] 175 taxmann.com 176 (Gauhati)[02-06-2025]