Post COVID pandemic, the invocation of force majeure under Section 168A of the CGST Act has stirred debate and legal scrutiny. This legal provision empowers the government to extend deadlines in response to unforeseen circumstances such as epidemics, natural disasters, and other calamities. However, the application of force majeure and the subsequent extensions of adjudication timelines have sparked controversy. There is ongoing debate regarding the justification of these extensions and whether they truly align with the requirements of Section 168A.
Table of Contents
1. Introduction
The adjudication process during the initial years of the GST regime has proven to be a challenging journey for taxpayers and the Government. These difficulties arose not only because the GST law was new but also due to the disruptions caused by the COVID-19 pandemic. Despite the Government’s use of Section 168A to extend timelines, taxpayers face hardships as adjudication deadlines are repeatedly pushed back.
The time limit for issuing adjudication orders under the GST law is linked to the due date for filing the Annual Return. In the initial years of GST implementation, the due date for filing the Annual Return was extended multiple times, consequently lengthening the adjudication process. The COVID-19 pandemic further exacerbated this issue, prompting the Government to extend adjudication timelines using the powers granted under Section 168A of the CGST Act, 2017.
Taxpayers have challenged these extensions in various High Courts. However, some courts have upheld the Government’s authority to grant multiple extensions under Section 168A. This article explores the applicability of Section 168A, its impact on the adjudication process under GST law, and the legal validity of the Government’s extensions.
2. Legal Provisions
2.1 Section 168A of the CGST Act
Section 168A of the CGST Act, inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, effective from 31-03-2020, states:
- Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, by notification, extend the time limit specified in, or prescribed or notified under, this Act in respect of actions which cannot be completed or complied with due to force majeure.
- The power to issue notifications under sub-section (1) includes the authority to give retrospective effect to such notifications from a date not earlier than the commencement date of this Act.
Explanation: For the purposes of this section, “force majeure” includes war, epidemic, flood, drought, fire, cyclone, earthquake, or any other calamity caused by nature or otherwise affecting the implementation of any provisions of this Act.
2.2 Time Limits for Adjudication Procedure under GST
Section 73(10) of the CGST Act sets the time limit for issuing orders to taxpayers for adjudication purposes where tax has not been paid, has been short paid, erroneously refunded, or input tax credit wrongly availed or utilised in bona fide cases. The time limit to issue orders under Section 73(10) is three years from the due date of filing the annual return for the relevant financial year.
2.3 Various Extensions of Adjudication Time Limits under Section 73
The timeline of various events relevant to the extensions of the adjudication time limit under Section 73 is summarised below.
| Sl. No. | Events | Date Extension |
| 1. | Extension of due date of filing Annual Return for FY 2017-18 | Upto 05-02-2020 and 07-02-2020[1] |
| Implication: Extension of time limit for issuing orders under Section 73(10) for FY 2017-18 | Upto 04-02-2023 and 06-02-2023 | |
| 2. | Extension of due date of filing Annual Return for FY 2018-19 | Upto 31-12-2020[2] |
| Implication: Extension of time limit for issuing orders under Section 73(10) for FY 2018-19 | Upto 30-12-2023 | |
| 3. | In 2021, the Supreme Court issued a suo motu direction[3] extending the limitation period for all judicial and quasi-judicial proceedings, including condonable and non-condonable cases, until further notice due to the COVID-19 pandemic. | |
| 4. | Later, in 2022, the Supreme Court issued a final direction[4] that the period from 15-03-2020 to 28-02-2022 shall be excluded in computing the limitation period for any suit, appeal, or application. In cases where the limitation period would have expired, a time limit of 90 days or the actual balance period (whichever is higher) shall be available from 01-03-2022 for filing appeals and other proceedings. | |
| 5. | On the above orders, the CBIC clarified[5] that the given extension by the Supreme Court does not apply to the adjudication cases. It will only be applicable in respect of any appeal which is required to be filed before Joint/Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and does not apply to any other proceedings under the GST laws. | |
| 5. | Extension of time limit for issuing an order under Section 73 for FY 2017-18 using powers under Section 168A based on the recommendation of 47th GST Council meeting vide Notification dated 05-07-2022 | Upto 30-09-2023[6] |
| 6. | Further extension of time limit for issuing an order under Section 73 for FY 2017-18 using powers under Section 168A based on the recommendation of 49th GST Council meeting vide Notification dated 31-03-2023 | Upto 31-12-2023[7] |
| Extension of time limit for FY 2018-19 | Upto 31-03-2024[8] | |
| Extension of time limit for FY 2019-20 | Upto 30-06-2024[9] | |
| 7. | Further extension of time limit for issuing an order under Section 73 for FY 2018-19 using powers under Section 168A vide Notification dated 28-12-2023 | Upto 30-04-2024[10] |
| Further extension of time limit for FY 2019-20 | Upto 31-08-2024[11] | |
Taxpayers have contested these extensions, arguing that the force majeure clause was improperly invoked as the impact of the pandemic had lessened by the time the notifications were issued.
3. Relevant Judicial Pronouncements
3.1 Faizal Traders Pvt. Ltd. Case[12]
The Kerala High Court upheld the Government’s decision to extend time under Section 168A for the following reasons:
- COVID-19 as Force Majeure – The time limit was extended due to COVID-19 considering various factors and challenges faced by the taxpayers and Governmental authorities.
- Executive Discretion – The duration of the extension due to the pandemic is at the discretion of the Executive, which has been taken based on the recommendation of the GST Council.
- Power under Section 168A – Section 168A, with its non-obstante clause, grants the Government overriding authority to extend deadlines for completing proceedings and taking action under Section 73.
3.2 Allahabad High Court Order[13]
A recent order by the Allahabad High Court has further ignited this issue with its detailed order. The key notable points mentioned in the order are summarised below:
- Force Majeure and Legislative Power – The Court recognised COVID-19 as a ‘force majeure’ event, underscoring that Section 168A empowers delegates to act in special circumstances.
- Legislative Intent and Scope – The legislature’s intention was not merely to provide an additional time limit for ongoing actions but to broadly encompass all activities affected by ‘force majeure’ events. The term ‘in respect of’ in Section 168A was interpreted to expand the scope of conditional legislative functions to include all actions that could not be completed due to the pandemic.
- Repeated Notifications – The issuance of multiple notifications by the legislature to extend limitations during the pandemic was within its legislative discretion.
- Nature of Limitation Periods – Legislative action cannot be complained of as being prejudicial to the taxpayers due to an extension of the limitation period. Limitation periods, though statutory, are not a pre-existing vested right of any party. They are created and extinguished in accordance with statutory law.
- Impact on Scrutiny and Audit – The Court recognised that the inability to conduct scrutiny and audits during the initial GST implementation period and the pandemic was due to circumstances beyond control, not mere difficulties. The full impact of COVID-19 necessitated extended periods for compliance.
In summary, the Courts upheld the legislative measures taken in response to the COVID-19 pandemic under Section 168A, validating the extensions of limitation periods.
4. Our Analysis
Based on the above set of provisions, it is unarguable that the Government is empowered to issue notification under Section 168A to extend time limits to issue adjudication orders under Section 73(10) due to force majeure. However, the extension must satisfy all the conditions mentioned in Section 168A. The relevant conditions are discussed separately below.
4.1 Force Majeure and Section 168A
The first condition requires that the extension should be in respect of the actions that cannot be completed due to force majeure. This means the Government can only extend deadlines when such events directly affect the actions.
Given that the legislature has empowered the Government to extend timelines in exceptional circumstances and such a power is not subject to any judicial review, it is important to ensure that these powers are exercised strictly due to force majeure and should not be coloured by any other factors.
Moreover, the government cannot unilaterally grant any such extension; the GST Council must recommend it. While Section 168A states that
“….the Government may, on the recommendations of the Council, by notification, extend the time limit specified in…”,
the word “may” has to be read with the phrase “extend the time limit”. This means that the Government has been given the option to extend the time limits due to the event of force majeure, and it is not mandatory. However, it is mandatory that any extension must be made by notification, and the GST Council should first recommend it.
4.2 Reasonableness of Multiple Extensions
The law does not specify the extent to which the Government can extend time limits. Therefore, the GST Council has to recommend the same. However, when the time limits of a particular compliance have been extended multiple times, the Council should well-reason any further extensions.
For Example, while extending the time limits in the 47th GST Council meeting, the Law Committee considered factors such as reduced staff, staggered work timings, and exemptions for certain employees from office attendance during the COVID-19 period. Another reason was that no actions for scrutiny or audit could be undertaken during the initial GST implementation period.
Later, in the 49th GST Council meeting, there were requests from tax administrations for further extensions under Section 73, as the earlier extension was insufficient due to delays in scrutiny and audit processes caused by COVID-19. The Council considered the same factors again, recognising the delays in scrutiny, assessment, and audit work due to pandemic-related restrictions and difficulties.
Despite concerns that such extensions might not be tax-friendly, new dates were recommended for the same reasons. These dates were notified based on the fact that there is no bunching of the last dates for these financial years and subsequent financial years.
An important consideration is whether the non-bunching of multiple communications for different tax periods constitutes a valid reason for multiple extensions. Additionally, it is worth examining if the same factors used previously for extensions remain valid, especially given that earlier extensions were found insufficient by the Departmental authorities. While administratively justified, these extensions simultaneously cause hardship for taxpayers and are not always perceived as tax-friendly measures.
4.3 Reasons for Recent Extensions Awaited
Another notification, i.e. Notification No. 56/2023-Central Tax, dated 28-12-2023, further extended time limits specifically for FY 2018-19 and 2019-20 to the following dates:
- FY 2018-19 – Extended until 30-04-2024
- FY 2019-20 – Extended until 31-08-2024
The most recent GST Council meeting occurred on October 7, 2023. While there is no indication from previous GST Council minutes or press releases that further extensions through the December 2023 notification were recommended, the minutes of the 52nd meeting are yet to be released by the Council. It will be interesting to see what additional factors the Council considers for further adjudication process extensions.
5. Conclusion
In conclusion, while Section 168A allows the Government to extend adjudication timelines due to force majeure events, such extensions must be properly justified and well-reasoned based on clear recommendations from the GST Council. Transparency and careful consideration of the reasons for extensions should be critically analysed to balance administrative needs and taxpayer convenience, especially given that judicial review is not applicable in these cases.
[1] Notification No. 06/2020-Central Tax, dated 03-02-2020
[2] Notification No. 80/2020-Central Tax, dated 28-10-2020
[3] Cognizance for Extension of Limitation, In re [2021] 127 taxmann.com 72 (SC)
[4] Cognizance for Extension of Limitation, In re [2022] 134 taxmann.com 307 (SC)
[5] Circular No. 157/13/2021-GST, Dated 20-7-2021
[6] Notification No. 13/2022-Central Tax, dated 05-07-2022
[7] Notification No. 09/2023-Central Tax, dated 31-03-2023
[8] Notification No. 09/2023-Central Tax, dated 31-03-2023
[9] Notification No. 09/2023-Central Tax, dated 31-03-2023
[10] Notification No. 56/2023-Central Tax, dated 28-12-2023
[11] Notification No. 56/2023-Central Tax, dated 28-12-2023
[12] Faizal Traders Pvt. Ltd. vs Deputy Commissioner, Central Tax and Central Excise [WP(C) No. 24810 of 2023]
[13] Graziano Trasmissioni v. Goods and Services Tax [2024] 163 taxmann.com 126 (Allahabad)
The post [Analysis] How Section 168A and Force Majeure Have Transformed GST Adjudication Timelines appeared first on Taxmann Blog.
