The Gauhati High Court in the case of M/S. BARKATAKI PRINT AND MEDIA SERVICES, DHRUBAJYOTI BARKOTOKY AND OTHERS VERSUS UNION OF INDIA AND 4 ORS., THE CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, THE GOODS AND SERVICES TAX COUNCIL, THE PRINCIPAL COMMISSIONER STATE TAX, THE ASSISTANT COMMISSIONER STATE TAX AND OTHERS vide WP(C)/3585/2024 WP(C)/4118/2024 WP(C)/4591/2024 And Others dated 19.09.2024, has deliberated on the validity of Notification No. 56/2023-CT issued under Section 168A of the CGST Act, which extended certain timelines for tax compliance. The Court clarified that Section 168A stipulates the need for a recommendation from the GST Council for the government to exercise its powers under this section. The argument by the counsel for the CGST that the government could act without such a recommendation was rejected. A recommendation is mandatory for the exercise of powers under Section 168A, and the absence of it makes the exercise of such powers invalid.

The Central Government issued this Notification No. 56/2023-CT, without a GST Council recommendation. The court concluded that this amounted to a colorable exercise of power. The court ruled the notification ultra vires to the Central Act because it was issued without following the mandatory recommendation requirement. As a result, impugned orders based on this notification were quashed, but the governments retained the right to address the issue retrospectively if done in accordance with the law. 

Facts of the Case:  The batch of writ petitions challenges the validity of the orders passed under Section 73(9) of the Central Goods and Service Tax Act, 2017 (CGST) and the Assam Goods and Services Tax Act, 2017 (Assam GST Act). The Petitioner are challenging the legality of the Notification No. 9/2023-CT dated 31.03.2023 and Notification No. 56/2023-CT dated 28.12.2023 stating that the government overstepped its powers under Section 168A in the absence of a true force majeure situation. They argue that if the court finds the notifications to be ultra vires, the corresponding orders passed under Section 73(10) would also be invalid, having been passed beyond the prescribed time limit.

Key provisions of Section 168A, (which was inserted during the COVID-19 pandemic) allow the government to extend time limits due to force majeure events, but such an extension requires a GST Council recommendation and the existence of a force majeure. The explanation of “force majeure” in Section 168A lists specific events like epidemics, wars, and natural disasters that would justify the invocation of this power.

The court is tasked with interpreting the relevant legal provisions, particularly Article 246A (which provides concurrent legislative power to the Parliament and the State Legislatures for GST laws) and Article 279A (which establishes the GST Council and its role in making recommendations). The court must first address whether the issuance of the notification without the Council's recommendation is legally sustainable. The phrase “on the recommendation of the GST Council” used in Section 168A implies that such recommendations are a condition precedent. Without this, the exercise of power by the Central Government could be deemed invalid.

Contentions of the Petitioner:  The Petitioners argued that Notification No. 9/2023-CT dated 31.03.2023 and Notification No. 56/2023-CT dated 28.12.2023, issued under Section 168A of the CGST Act, were ultra vires the Act because the necessary preconditions were not met, particularly the absence of a force majeure event and no proper recommendation from the GST Council in the case of Notification No. 56/2023-CT. Also, argued that there was no corresponding notification under the Assam GST Act at the time, rendering the extensions under the State Act unlawful.

Contentions of the Respondents:  The respondents relied on the Union of India v. Mohit Minerals case to argue that the GST Council's recommendations are not binding but merely advisory. However, this argument may not hold in the context of Section 168A, where the statute explicitly requires a recommendation. The Mohit Minerals judgment focused on the larger structure of GST laws but did not dilute the mandatory nature of recommendations for specific provisions like Section 168A.

Observations of the Court : The court notes that the Orders-in-Original being challenged concern the financial years 2018-19 and 2019-20, and were passed in 2024. The court excludes the relevance of Notification No. 9/2023-CT and a State Government notification to this case because they were issued after the impugned orders.

The court acknowledges that there was no recommendation from the GST Council prior to issuing Notification No. 56/2023-CT. However, the respondents attempted to justify the notification on the grounds of force majeure, citing COVID-19 delays. While the pandemic may constitute a valid force majeure, the issuance of the notification without adhering to procedural safeguards, such as securing a Council recommendation, remains problematic.

The Court also examined Articles 246A and 279A of the Indian Constitution, which grant legislative powers over GST to both Parliament and State Legislatures, while emphasizing the role of the GST Council in maintaining fiscal harmony. Article 246A gives simultaneous power to both the Union and States, and Article 279A establishes the GST Council to recommend GST laws and policy.

Also, noted the respondent's argument for ratification of the notification in subsequent GST Council meetings was also considered. However, the court observed that no such ratification was evident from the minutes of the 50th to 54th GST Council meetings. This lack of ratification strengthens the petitioners' claim that the notification is ultra vires.

Several orders under Section 73(9) were passed during the extended period granted by Notification No. 56/2023-CT. Since this notification itself is under challenge for procedural irregularity, the validity of these orders is also called into question. If the notification is found to be invalid, the orders passed under its authority could be rendered without jurisdiction.

The court also considered the validity of the notification issued by the State of Assam. It found that while the state government had followed due process in issuing a notification based on the GST Council's 49th meeting, it had not extended the time for Financial Years 2018-19 and 2019-20 beyond what was stipulated in Notification No. 56/2023-CT, leaving a gap in legal coverage.

Held that : The Court held as under:

• Notification No. 56/2023-CT Ultra Vires:  Notification No. 56/2023-CT was issued without the mandatory recommendation of the GST Council, therefore, held that the notification is ultra vires the provisions of Section 168A of the Central GST Act.
• Orders Passed under Section 73(9) Invalid:  Since the notification extending the time limit for passing orders was found to be invalid, the orders passed under Section 73(9) during the extended period are also deemed to be without jurisdiction and are quashed.
• Challenge to Notification No. 9/2023-CT Partly Allowed:  The challenge to Notification No. 9/2023-CT is partly allowed to the extent that it extended deadlines without justifiable grounds of force majeure beyond the pandemic period.

To read the complete judgment 2024 Taxo.online 2173