No Limitation for Adjudication of GST Appeals vis-à-vis Recurring Interest: A Constitutional, Legal and Practical Analysis
The Goods and Services Tax (GST) law prescribes strict limitation periods for filing appeals but remains conspicuously silent on any outer time limit for adjudication of such appeals at any appellate level. While this legislative choice is often justified on grounds of administrative practicality and judicial independence, the absence of limitation creates serious inequities when the taxpayer has already made the mandatory pre-deposit and interest proposed in the impugned order continues to accrue during prolonged appellate delays. This article examines the legal logic behind the absence of limitation, how that logic collapses in cases of recurring interest, and why constitutional courts increasingly intervene to restore balance in favour of the assessee.
1. The Structural Design of GST Appeals
Appeals under the GST regime are governed by Chapter XVIII (Sections 107–121) of the CGST Act, 2017. A striking feature of this framework is the asymmetry in limitation:
- Strict and mandatory timelines for filing appeals by taxpayers and the department
- Complete absence of a statutory time limit for deciding appeals by appellate authorities
This design reflects a conscious legislative choice rather than an omission. However, the consequences of this choice become deeply problematic where appellate proceedings remain pending for years and interest liability keeps mounting despite statutory stay of recovery.
2. The Traditional Logic Behind No Limitation for Adjudication
2.1 Appeal as Continuation of Original Proceedings
It is a settled principle of tax jurisprudence that: “An appeal is a continuation of the original proceedings.”
Once an assessee files an appeal within limitation and complies with pre-deposit requirements, the responsibility to conclude proceedings shifts entirely to the State. Fixing a rigid limitation for adjudication would risk extinguishing a validly exercised statutory right due to administrative inefficiency.
2.2 State Cannot Benefit from Its Own Delay
Another foundational doctrine of public law provides: “No person can take advantage of his own wrong.”
Since appellate delays are attributable to institutional factors such as pendency, officer shortages, and administrative transfers, the legislature avoids prescribing timelines whose breach would penalize the assessee for no fault of his own.
2.3 Judicial Independence and Separation of Powers
Appellate authorities and tribunals discharge quasi-judicial or judicial functions. Prescribing rigid timelines with adverse consequences would interfere with judicial discretion and independence. Hence, legislative silence on adjudication timelines is deliberate, not accidental.
3. The Assumption Underlying This Logic
The justification for unlimited adjudication time rests on a critical assumption:
- Revenue interests are safeguarded through mandatory pre-deposit
- Balance demand is stayed by statute
- No continuing prejudice is caused to the assessee
This assumption holds true only if the taxpayer’s financial exposure remains static during pendency of appeal.
4.Where the Logic Fails: Recurring Interest Liability
4.1 Nature of Interest Under GST
Interest under Section 50 of the CGST Act is:
- Automatic
- Compensatory
- Time-linked
It continues to accrue till the date of actual payment or final resolution.
4.2 The Fundamental Contradiction
In appellate situations:
- The assessee has complied with law by filing appeal and paying pre-deposit
- Recovery of balance demand is statutorily stayed
- The assessee is legally disabled from concluding the liability
Yet, interest keeps accruing solely due to delay in adjudication, which is entirely attributable to the State.
This converts interest from a compensatory levy into a financial burden caused by administrative inaction.
5. Constitutional Implications
Once interest continues to accrue during appellate delay, the neutrality of “no limitation” collapses, triggering constitutional scrutiny.
5.1 Article 14 – Manifest Arbitrariness
Two similarly placed taxpayers:
- One appeal decided in 6 months
- Another pending for 5 years
The latter suffers significantly higher interest exposure without any distinguishing conduct. This differential treatment is arbitrary and irrational.
5.2 Article 19(1)(g) – Unreasonable Restriction on Business
Prolonged appellate delays:
- Block working capital
- Create balance-sheet uncertainty
- Impair business planning
Recurring interest during such delay constitutes an unreasonable restriction on the right to carry on trade or business.
5.3 Article 21 – Due Process and Fairness
Fiscal certainty is an essential component of due process. Endless accumulation of interest during appellate delay results in punitive consequences without adjudication, violating the guarantee of fairness under Article 21.
6.Judicial Correction Through Writ Jurisdiction
Recognizing this imbalance, constitutional courts have stepped in to restore equity. While GST-specific jurisprudence is still evolving, courts across tax regimes have consistently:
- Directed time-bound disposal of appeals
- Stayed further accrual of interest during unjustified delay
- Excluded periods of departmental delay from interest computation
- Granted refunds with interest where assessee ultimately succeeds
Courts have emphasized that: “The State cannot profit from its own delay when the assessee has complied with statutory requirements.”
7.Why the Legislature Left the Correction to Courts
The GST framework reflects a deliberate policy choice:
- Fix strict timelines where taxpayer control exists (filing appeals)
- Avoid fatal timelines where State control exists (adjudication)
- Allow constitutional courts to correct extreme inequities case-by-case
This avoids systemic collapse while preserving judicial oversight.
The absence of limitation for adjudication of GST appeals is constitutionally defensible only so long as it remains neutral. Once recurring interest continues to accrue during appellate delay, the balance tilts decisively against the assessee. In such cases, equity, constitutional principles, and sound tax jurisprudence demand that the delay operate in favour of the taxpayer, not the State.
Until legislative correction emerges, constitutional courts remain the only effective safeguard against fiscal injustice arising from prolonged appellate inaction.
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