CGST Act: Force Majeure Clause in Section 168A – Applicable to Current 73/74 Notices?

Introduction: Understanding the intricacies of Section 168A of the CGST Act is crucial in unraveling the complexities surrounding the extended timelines for GST notices. This article delves into the combined reading of Section 168A and Section 73, providing insights into recent notices issued across the country for the financial years 2017-18 and 2018-19.

As per Section 168A of the CGST Act 2017, “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.”

“Explanation. – For the purposes of this section, the expression “force majeure” means a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise affecting the implementation of any of the provisions of this Act.”

Further, Section 73 deals with issue of Show Cause Notices by the proper officer when any tax has not been paid or short paid or erroneously refunded or where the Input Tax Credit (ITC) has been wrongly availed or utilized for non – fraud cases. The time limit to issue such notices can be understood by referring to Section 73(10) which says that the Order under Section 73 can be issued within 3 years from the due date of furnishing of the Annual Return (GSTR-9) for the particular financial year to which such tax or ITC is related.

Now assuming we are talking about the F.Y 2017-18 we need to understand the time limit for filing of Annual Return for F.Y 2017-18 i.e. as per section 44 of the CGST Act provides for the time limit to furnish an Annual Return for every financial year, before the thirty-first day of December following the end of such financial year. Hence, technically speaking the due date for furnishing of Annual Return (GSTR-9) for F.Y 2017-18 was 31-12-2018, however, Vide Order No. 08/2019-Central Tax dated 14.11.2019 and Order No. 10/2019-Central Tax dated 26.12.2019, the due date to file Annual Return for financial year 2017-18 was extended to 05.02.2020 / 07.02.2020. Thus, the last date to pass an Order under Section 73(10) of the CGST Act, 2017 was extended till 05.02.2023 / 07.02.2023. Accordingly, the last date to issue a Notice under Section 73 of the CGST Act, 2017 was 07.11.2022.

However, vide Notification No. 9/2023-CT dated 31.03.2023 issued by the Central Government, in terms of Section 168A of the CGST Act, 2017, the time limit specified under sub-section (10) of Section 73 for issuance of Order has been extended till 31.12.2023 which technically means that Notices under Section 73 can be issued till 30.09.2023.

Following the same criteria for the F.Y 2018-19, the original due date for filing of Annual Return for F.Y 2018-19 was 31-12-2019, however the same was also extended Vide notification No. 69/2020 – Central Tax, dated 30.09.2020, the due date for furnishing of the Annual return for the FY 2018-19 has been extended till 31.10.2020 & further Vide notification No. 80/2020 – Central Tax, dated 28.10.2020, the due date for furnishing of the Annual return for the FY 2018-19 has been extended till 31.12.2020

Thus, the last date to pass an Order under Section 73(10) of the CGST Act, 2017 for the F.Y 2018-19 was extended till 31.12.2023. Accordingly, the last date to issue a Notice under Section 73 of the CGST Act, 2017 was 30.09.2023.

However, vide Notification No. 9/2023-CT dated 31.03.2023 issued by the Central Government, in terms of Section 168A of the CGST Act, 2017, the time limit specified under sub-section (10) of Section 73 for issuance of Order for the F.Y 2018-19 has been extended till 31.03.2024 which technically means that Notices under Section 73 can be issued till 31.12.2023.

Further, vide Notification No. 56/2023-CT dated 28.12.2023 issued by the Central Government, in terms of Section 168A of the CGST Act, 2017, the time limit specified under sub-section (10) of Section 73 for issuance of Order for the F.Y 2018-19 has been extended till 30.04.2024 which technically means that Notices under Section 73 can be issued till 31.01.2024.

Now, the main question is whether the clause of 168A i.e. Force Majeure can be invoked to extend the time limit for passing of order under section 73 of the CGST Act 2017. Section 168A begins with a non-obstante clause, hence the time limit prescribed under the Act can only be extended in special circumstances laid down under the said section.

Let us understand the meaning of Force Majeure as explained in section 168A as a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise. From a perusal of Section 168A of the CGST Act, 2017, it is evident that the same can be invoked only when the required action cannot be completed due to force majeure.

However, the notification issued doesn’t mention any reason or validation for invoking the force majeure clause, and as India & the whole world were affected by epidemics such as COVID-19 we assume that the main reason behind invoking the 168A clause was COVID-19, since Covid-19 affected both the GST Department or we can the Government and the Business Small or Medium Enterprises. The business was badly hit by the epidemic Covid 19 and there were huge losses also the Departments during the Covid 19 epidemic due to the reduced number of staff & stringent timings of the offices led to delays in the process of scrutiny and audit, which could be started properly only after Covid 19 restrictions were uplifted.

Given the above, it is very interesting to note that on 28^th December 2023 notification was issued for an extension of the time limit for the issue of an Order for the F.Y 2018-19 under section 73 for one more month from 31^st March to 30th April by invoking the section of 168A i.e. Force Majeure here is no doubt that at present (at the time of issue of Notification No. 56/2023-Central Tax dated 28/12/2023), there is no such ground attributable to ‘force majeure’ which affects the implementation of any of the provisions of the GST Act throughout India. Thus, no hesitation to say that the invocation of Section 168A is an act of grave misuse of legislative provisions.

Recently, the Hon’ble Gujarat High Court in the case of M/s SRSS Agro Pvt. Ltd. vs Union of India was pleased to issue notice, wherein, it was mentioned that the notification dated 31.03.2023 extending the time limit specified under Section 73 of the Act by virtue of the powers under Section 168A of the Act is unjustified as the extension has to be for special circumstances. The court has accepted the case and it will be very fascinating to see how far the debate and discussion go.

Further, a case has been filed in the High Court of Gujrat at Ahmedabad, by the name of  M/s. New India ACID Baroda Pvt. Ltd. vs. Union of India where it was argued that there is no ground mentioned in the impugned Notification no. 9 of 2023 dated 31.03.2023 extending the time period for issuance of the show-cause-notice under Sub-section 73(10) of the Central Goods and Service Tax Act, 2017 while exercising the powers under Section 168A of the Act. It was submitted that after the year 2022, there was no Covid 19 Pandemic in existence and accordingly the provisions of Section 168A of the Act would not be applicable for extension of time. Also, the attention of the Court to the explanation to section 168A of the Act and submitted that none of the eventuality mentioned therein existed when the impugned notification was issued. The court gave ad-interim relief, no final order shall be passed by the respondent authority pursuant to the show-cause-notice issued during the period extended by the impugned notification without permission of the Court till the next date of hearing.

Also, a case has been filed in High Court of Gujrat at Ahmedabad, by the name of  M/S Gajanand Multishop Through Pankajkumar Roshanlal Gandhi  based on similar facts stated above.

Furthermore, recently in the High Court of Guwahati at Assam, a case has been accepted by the name of M/S Indus Towers Limited (Formerly known as Bharti Infratel Limited) vs Union of India where it was argued that Notification no. 9 of 2023 dated 31.03.2023  is issued in exercise of powers conferred by Section 168A of the Central Goods and Services Act, 2017 which is against any reason for Force Majeure It is the contention of the petitioner that after the year 2022, there was no COVID-19 pandemic in existence.

One more interesting fact that has been mentioned in the interim order is that attention has been drawn to the order dated 10.01.2022 passed by the Hon’ble Supreme Court of India in Suo Motu Writ Petition [C] no. 3 of 2020 to contend that the Hon’ble Supreme Court of India after taking all the factors into account, had extended the period of limitation only up to 28.02.2022. Thus, there was no occasion for the Council to take resort to the factor of the COVID-19 pandemic in order to extend the time limit under Section 73(10) of the CGST Act, 2017.

Considering the above the Guwahati High Court has given an interim relief to the petitioner under further hearing.

Considering all of the above cases we can say that there is something interesting to watch in the future regarding the use of the 168A power to extend the time limit under GST as many cases have already been filed challenging the powers used by the department of 168A of the CGST ACT 2017 despite Covid 19 being over.

Conclusion: The extension of timelines under Section 168A of the CGST Act, ostensibly for force majeure reasons, has sparked legal debates and challenges. The judiciary is actively addressing concerns over the misuse of such powers, especially when the grounds for invoking force majeure seem unclear post-2022. As cases unfold, it remains to be seen how courts navigate this complex intersection of legislative provisions, pandemic aftermath, and the need for procedural fairness in tax matters.