prpri Extension of Limitation under GST Law due to Covid-19 – Critical Analysis of CBIC Circular Extension of Limitation under GST Law due to Covid-19 – Critical Analysis of CBIC Circular

Background

1. Due to COVID – 19 pandemic, everyone faced several challenges in pursuing the requisite actions within the time frame given under the various laws. Hon’ble Supreme Court recognizing the same, on suo motu basis, passed the first Order (Suo Motu Writ Petition (Civil) No(s). 3/2020)) dated 23.03.2020 granting the relief in terms of the said limitation. Further noticing the returning to normalcy Hon’ble Court vide second Order dated 08.03.2021 sought to bring an end to the relief granted vide the first Order. However, on account of the 2nd COVID – 19 wave, the Supreme Court vide Order dated 27.04.2021 in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020 restored its earlier first Order dated 23rd March 2020 granting the relief in terms of excluding the COVID period for considering the period of limitation under various laws. Specifically, the Hon’ble Court held as under:

“We also take judicial notice of the fact that the steep rise in COVID-19 Virus cases is not limited to Delhi alone but it has engulfed the entire nation. The extraordinary situation caused by the sudden and second outburst of COVID-19 Virus, thus, requires extraordinary measures to minimize the hardship of litigant–public in all the states. We, therefore, restore the order dated 23rd March, 2020 and in continuation of the order dated 8th March, 2021 direct that the period(s) of limitation, as prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings, whether condonable or not, shall stand extended till further orders.”

2. The aforesaid decision, therefore, directed that the calculation of the period of limitation (under any general or special laws) in respect of “all judicial or quasi-judicial proceedings” whether condonable or not, shall exclude the period from 15.03.2020 till further orders.

CBIC Circular

3. Now CBIC (GST Policy Wing) has issued Circular No. 157/13/2021-GST dt. 20.07.2021 clarifying the understanding of the aforesaid Supreme Court decision in the context of GST Laws. Essentially the Circular has divided the actions under three categories and has clarified the application of the aforesaid decision under the said categories as follows:

Sr. No. Category Clarification
1 Proceedings that need to be initiated or compliances that need to be done by the taxpayers These actions would continue to be governed only by the statutory mechanism and time limit provided/ extensions granted under the statute itself. Various Orders of the Hon’ble Supreme Court would not apply to the said proceedings/ compliances on part of the taxpayers.
2 Quasi-Judicial proceedings by tax authorities The tax authorities can continue to hear and dispose off proceedings where they are performing the functions as quasi-judicial authority. This may interalia include disposal of application for refund, application for revocation of cancellation of registration, adjudication proceedings of demand notices, etc.

Similarly, appeals which are filed and are pending, can continue to be heard and disposed off and the same will be governed by those extensions of time granted by the statutes or notifications, if any.

3 Appeals by taxpayers/ tax authorities against any quasi- judicial order Wherever any appeal is required to filed before Joint/ Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where a proceeding for revision or rectification of any order is required to be undertaken, the time line for the same would stand extended as per the Hon’ble Supreme Court’s order.

Critical analysis

4. The clarification issued for the 3rd category (appellate proceedings) is broadly in line with the view of the Hon’ble Supreme Court. However, the clarification issued for the 1st and 2nd categories merits a deeper analysis. This is so because the said clarification states that the extension of limitation shall not apply to “quasi-judicial proceedings” per se but the same shall apply only to the appeals/revision/rectification applications filed against the quasi-judicial orders. One has to consider whether the decision of the Hon’ble Supreme Court supports the said view or not?

5. Let us consider a scenario of the refund claims to better understand the nuance. When a taxpayer applies for a refund, the original authority is required to pass an Order deciding the said claim. Now the said process entails the application of judicial mind as the claim is required to be adjudicated considering the provisions of law by following the principles of natural justice.

6. The aforesaid Circular clarifies (under the 2nd category) that the disposal of the refund application shall be considered to be a “quasi-Judicial proceedings” but the relief in terms of the extension of limitation shall not apply to the same. It further clarifies (under 3rd category) that the relief shall apply only to the appeals/revision/rectification applications which may be filed against the refund rejection Orders passed under the said “quasi-Judicial proceedings”. The same Circular clarifies (under 1st category) that the activity of filing the refund claim shall not be a part of the “quasi-judicial proceedings” and hence the said claims are required to be filed within the time limit provided/extensions granted under the statute itself. Therefore we need to analyse the following issues:

a. whether the relief granted by the Hon’ble Supreme Court shall extend only to the appeals filed against the Orders passed under the “quasi-judicial proceedings” or to even to the “quasi-judicial proceedings” per se? and

b. whether the filing of the refund claim and the adjudication of the same are part of the collective “quasi-judicial proceedings” or are separate proceedings?

Quasi-judicial proceedings

7. To answer the first question we need to consider the following important points from the decision of the Hon’ble Supreme Court:

a. The first Order (Suo Motu Writ Petition (Civil) No(s).3/2020) dated 23.03.2020 recognized the “situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/ appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State)”. To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, the extensions have been granted.

b. Further, vide the first Order the extension was granted in respect of “all such proceedings” under the general law or Special Laws. Second Order dated 08.03.2021 then came to be issued noticing the returning to normalcy directing that the period from 15.03.2020 till 14.03.2021 shall be excluded for computing the period of limitation. However, on account of the 2nd COVID wave vide the third Order (Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020) dated 27.04.2021 the extensions granted vide the first Order were extended further (i.e. from 15.03.2020 till further Orders). The said third Order further clarified that the extensions have been granted not only in respect of all “judicial” proceedings but even in respect of the “quasi-judicial proceedings”.

c. The aforesaid background indicates that the extensions have been granted on account of various difficulties (not only limited to the difficulties like not being able to physically file the proceedings) faced on account of the COVID – 19 pandemic. Further, the extensions apply to all “judicial” as well as “quasi-judicial proceedings”.

8. Now the terms “proceedings” or even “judicial proceedings” or “quasi-judicial proceedings” have not been defined in the Act.

9. The Courts have defined the term “proceedings” to include the step or series of steps adopted for doing or accomplishing something or some right (see P. L. Kantha Rao v. State of AP AIR 1995 SC 807; Risk Capital & Technology Finance Corporation Ltd. v. Harnath Singh Bapna AIR 1997 Del 239; S. Krishnaswamy AIR 1991 Mad 214; Ram Narain v. Director of Consolidation AIR 1965 All 172). Further, the said term connotes the steps taken by the party as well as the steps taken by the authority. This is so for the reason that the Hon’ble Supreme Court Order as submitted above has given directions in the context of the difficulties faced by the parties and not just the difficulties faced by the authority. Therefore we submit that the term “proceedings” has to be understood broadly to include all the steps taken by the party/authority to make a claim and to determine the said claim.

10. Also, the term “quasi-judicial proceedings” means proceedings relating to an adjudicative act. In other words, it includes proceedings wherein the authority (who is not a Court) has to follow the principles of natural justice and has the discretion to decide (see State of HP v. Raja Pal AIR 1999 SC 1786; Avadhesh Pratap Singh v. UP AIR 1952 All 63; Mad. High Court Advocates Association v. Secretary AIR 2015 Mad 213).

11. Now a harmonious reading of the term “proceedings” along with “quasi-judicial proceedings” entails that the same shall include the steps (lis) taken by the party to institute a claim and the steps taken by the authority to determine the said claim.

12. Therefore we submit that the decision of the Hon’ble Supreme Court granted relief in terms of calculation of the period of limitation to all the “judicial” as well as “quasi-judicial proceedings” and not just to the “proceedings” initiated against the Order passed under “quasi-judicial proceedings”. Hence for the first question, we submit that the Circular has not correctly appreciated the decision of the Court.

13. Coming to the second question, as discussed above the steps taken by the taxpayer in making a refund claim and the adjudication of the said claim is required to be collectively referred to as part of the “quasi-judicial proceedings”. The act of making the refund claim therefore cannot be treated on a different pedestal as opposed to the act of adjudicating the claim. This is more so as the Supreme Court Order has been passed obviating the difficulties faced by the citizens in pursuing their claims. Hence a view promoting the said intent deserves to be adopted.

14. Hence we submit that the clarifications issued vide the given Circular are required to be revisited in light of the correct appreciation of the decision of the Apex Court.

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One Comment

  1. YENU SATYAN says:

    YOU HAVE CRITICALLY ANALYSED THE ORDER.. THANKS A LOT TO YOU AS THIS WILL GUIDE OTHERS ALSO FOR UNDERSTANDING THE CIRCULAR OF DEPARTMENT

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