Summary: The CGST Act, 2017, prescribes differing time limitations for filing appeals and rectifications—three months for taxpayers and six months for the department. These incongruities can cause severe complications, as demonstrated by a tragic case involving a senior CGST officer. The case stemmed from conflicting timelines and procedural ambiguities in refund applications and appellate orders. The appellate authority’s contradictory directives, coupled with missed rectification opportunities, led to cascading errors and legal complications. Ultimately, a High Court ruling criticized the departmental handling and ordered disciplinary action against the officer. The resulting mental distress culminated in the officer’s untimely demise. The situation underscores the urgency to review and harmonize the CGST Act’s timelines. Uniform limitations for taxpayers and the department, streamlined appeal procedures, and clear guidelines for refund applications could prevent such incidents. Addressing these issues would ensure fairness and alleviate the burden on both taxpayers and officers. The case highlights the broader need for systemic reforms in tax administration to align with constitutional principles of equality and reasonableness.
Incongruent provisions of limitation under CGST Act may lead to terrible and severe damage, and have snatched precious life of a senior CGST Officer.
This short article has been scripted to delve into the tricky topic as to how the different time limitations fixed for filing rectifications and appeals against the orders passed under the GST law ( CGST Act, 2017 ) can lead to a very strange, catastrophic and terrible situations, causing unimaginable loss in terms of time, energy, finance and even health and life of the individuals effected by such orders.
At the outset, it may be mentioned that India is a democratic country, governed by the Constitution and the various laws framed by the Central and State legislatures in so far as they are not in contravention of the basic provisions of the Indian Constitution.
Among others, the Indian Constitution provides for the Fundamental Rights, and Right to Equality is enshrined in Articles 14.
Article 14 says that “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.” Therefore, the State cannot favour or disfavor any individual, be they Citizens or non-citizens, and has to ensure not only equality before the law, but also the equal protection of law to every individual. Here the individual covers not only the natural persons, but also juristic persons e.g. firms / companies / corporations etc.
However, the right to equality like other fundamental rights, is subject to the reasonable restrictions and limitations. One such limitation is that there can be special treatment to certain class of persons based on some reasonable grounds .The Hon’ble Supreme Court has propounded the “doctrine of reasonable classification” to test the constitutionality of the law. The only exceptions thus permissible to the “equality before law” have to be based on reasonable classification. In order to be tested on the anvil of “reasonability and thus constitutionality”, any classification enshrined in any law has to be congruent to and based on the twin criteria of “intelligent differentia” meaning that there should valid and reasonable grounds and data for classification of individuals and subjects, and secondly that the said differentia must have rational connection with the object sought to be achieved by the said act of “classification” in the relevant Act/law. Thus, there ought to be nexus between the classification and the object purported to be achieved by the said classification laid down by the law. In the absence of either “reasonable differentia” or “nexus” between the differentia and the object sought to be achieved, the law may be struck own as “unconstitutional”.
Now coming to the CGST Act, 2017, it provides that in case of any grievance against the Orders passed by the competent Officers, the aggrieved person ( including the Department) can take recourse to either of the following remedies : –
(1) Filing Rectification Application under Section 161 within three months from the date of issue of the relevant order;
Filing the appeal under Sections 107 or 112 within three months of the date of communication of the relevant order by the taxpayer and within six months from the date of communiation of the Order by the Commissioner ( meaning Department).
It is in this backdrop, that the incongruity by providing the different limitations for filing appeal before the Appellate fora by the Taxpayer and Department, appears to be causing trouble and terrible loss not only to the taxpayer, who is generally at the receiving end, but also in some exceptional circumstances, taking away it toll on the Departmental officers also.
While the propriety and the constitutional validity of this classification is to be accepted until and unless final arbitration and decision of the competent Court of law, but how can this prove fatal even for the departmental officers, who usually take the so-called pro-revenue view in the various Orders to avoid any adverse remarks or incur the wrath of the senior authorities, can be seen from the classic example of one refund order passed in the case of M/s. Proxima Steel Forge Pvt. Ltd., Phase-II, Jalandhar.
In the above-said case, the taxpayer had applied for the sanction of refund under Section 54 of the CSGT Act, 2017, on 26.05.2022, for claiming Rs. 2.02 crores. The said application was rejected by the competent refund sanctioning authority by following the due procedure by issuance of appropriate Show Cause Notice and adjudication Orders under Section 73 of the Act, on the ground of limitation, having been filed after two years from the relevant date. When the taxpayer went in appeal, the appellate authority (Joint Commissioner of CGST ) in the Order-in-Appeal No. LUD-GST-001-APP-190/2023 dated 22.08.2023, held that the application ought not be rejected on the grounds of limitation and remanded the matter to be decided on merits afresh.
The taxpayer then filed fresh refund application on 06.11.2023. As there was contradiction in the Order-in-Appeal, the refund sanctioning officer-the jurisdictional Assistant Commissioner wrote a letter to the Joint Commissioner ( the appellate authority who passed the Order-in-Appeal) on 14.12.2023. He requested the Joint Commissioner ( Appeals) to clarify the point of contradiction, as it is mentioned in the said Order that the last date for filing the application was 20.05.2023, whereas the application was filed on 26.05.2022, and hence, the order needs recall/rectification. However, treating the said letter as Rectification request, the Joint Commissioner replied on 29.12.2023 that since the period of 3 months have already elapsed from the date of order, nothing could be done at this stage and, therefore, Section 161 ( Rectification clause) has no application at this stage. Therefore, the Assistant Commissioner was left with only option to decide the case as per law based, on his own wisdom.
At this stage, it is to be noted that when there was an apparent error in the Order-in-Appeal, and copy thereof is sent to the concerned Divisional Office as well as the Review Section of the Headquarters headed by the Joint/Additional Commissioner and supervised by the Commissioner, it was incumbent upon the concerned officials posted in the Review Branch and the other concerned branches to move for rectification within the period of three months from the date of order. Alternately, they could have reviewed the order expeditiously and either accepted it or filed the appropriate appeal, making the matter crystal clear for the sanction of the refund by the refund sanctioning authority. It is to be noted here that the Review Branch comprises of the officials from the rank of Tax Assistant/Inspector, Superintendents and right up to the Joint/Additional Commissioner of the concerned Commissionerate. But perhaps keeping in view the usual practice, none moved the file because herein comes the different limitations provided for moving the rectifications and appeals by the Department, which played spoilsport. Generally, the decision of review the Orders, irrespective of its acceptance or otherwise, is taken at the fag end of six months provided for filing the appeal by the Department.
Keeping these circumstances in backdrop, the taxpayer having filed fresh refund application under Section 54 in view of the orders of the Appellate Joint Commissioner, the jurisdictional Assistant Commissioner was bound as per law to decide the matter within a period of 60 days from the date of generation of ARN of the refund application. Keeping in view of the general pro-revenue mind set and the quantum of refund involved ( Rs. 2.02 crores), the concerned Assistant Commissioner, in his own wisdom, issued fresh show cause notice to the taxpayer proposing to reject the application, unfortunately again on the ground of limitation. The taxpayer, at this stage, perhaps knowingly and deliberately, did not pay any heed and thus neither filed any reply to the said show cause notice nor appeared for personal hearing given by the concerned Assistant Commissioner. The Assistant Commissioner then passed the ex parte order thereby rejecting the refund application on the grounds of limitation again (perhaps he based his view-point on the basis of contradiction in the orders of the Appellate Joint Commissioner and non-defence on the taxpayer.)
In the same way as in the 2nd show cause notice before the proper officer i.e. refund sanctioning authority, the taxpayer did not go into appeal against the Order-in-original rejecting the refund application again, as required under Section 107 of the CGST Act, and let the time limitation for filing appeal to expire. This obviously appeared to have been done keeping in view that fact that had the taxpayer approached the High Court earlier with the intervening time limitation of appeal period, the Court would have asked them to take recourse to the efficacious remedy of filing appeal, which would have perhaps not succeeded because of non-defence and non appearance in the ex-parte proceedings leading to the rejection order. Now the matter went to the Hon’ble Punjab and Haryana High Court in Civil Writ Petition filed by the taxpayer, where the issue of limitation appears to have slipped to the background, and only the matter of insubordination in not complying with the orders of the appellate authority appears to have taken the centre-stage. The Bench having been displeased by the non-filing of the affidavit by the Commissioner, despite directions to do so, about the action proposed to be taken against the concerned Assistant Commissioner, for his alleged insubordination, passed the orders, thereby directing ( a) setting aside the Orders of Assistant Commissioner and adjudication of the refund by appointing another competent officer (b) to initiate the disciplinary proceedings for major penalty by the Commissioner against the concerned Assistant Commissioner. It may be noted here that since the Assistant Commissioner is Group A Officer and is appointed by the President of India through the CBIC, it appears that the appropriate disciplinary action can be initiated/taken only at the Board level only, by following the due procedure of law. The due procedure of law provides certain protections under Article 311 of the Indian Constitution to the public servants.
Thus, the whole blame for the various fallacies and omissions came to be fastened upon the shoulders of the concerned Assistant Commissioner. It appears that there were following fallacies/errors/omissions ( call it by whatever name), at different stages: –
- that the dates mentioned in the orders of the Joint Commissioner Appeals were contradictory;
- that there appears to be no provision in the CGST Act for the appellate authority to remand the matter to the original adjudication authority and it was incumbent upon him to decide the case as to the period and quantum of refund admissible as per the limitation;
- the concerned Assistant Commissioner again appears to have missed the point of deciding the period of limitation and the quantum of refund admissible within the limitation period;
- that the Commissioner omitted firstly to get the rectifications made in the Orders of the appellate Joint Commissioner;
- that the Commissioner again failed to submit the proper defence to the CWP and file the requisite affidavit before the Hon’ble High Court; this appears to have enraged the Hon’ble Judges comprising the Double Bench hearing the matter.
- that the Departmental counsel before the Hon’ble Court appears to have missed the opportunity to request the Bench to take a lenient view and ask for calling and hearing the concerned Assistant Commissioner, against whom the orders were passed in his absence and without proper opportunity;
- that the orders of the Hon’ble Bench in ordering the disciplinary proceedings mandating for “major penalty” appears to be harsh (perhaps the Bench was unaware about the integrity, length of services and service record of the concerned Assistant Commissioner. The major penalty may result in removal and dismissal from the service with severe social stigma and huge financial loss.
- Another mute point is that the orders were passed not in executive, but quasi-judicial capacity, and were appealable orders before the Appellate fora.
In the meanwhile, the concerned Assistant Commissioner was under severe anxiety on the fear of losing the service benefits after completion of long tenure of service spanning around 34 years ( he was DR Inspector joining in 1990 Batch). Not being able to bear mental pressure, a precious life of a senior officer ( the concerned Assistant Commissioner) has been lost, as he reportedly met with an accident on the railway tracks in October, 2024.This accident is a strange case of co-incidence. The Department on its part has reportedly decided to file SLP in the case, though albeit it is late, having gone through the usual red-tapsim and bureaucratic procedures.
Now reverting to the main point, it appears to be not reasonable to allow the different time lines of limitation (a) there appears to be no justifiable reason for allowing different limitation periods of three and six months respectively for the tax-payers and the Department, as the latter ( Department ) has sufficient infrastructure and personnel for Review Branches manned by so many officials as compared to the taxpayers, especially those small and medium enterprises, who lack access to adequate and well-trained/acquainted personnel/ consultants; and again there is no justifiable reason for allowing different periods of limitation for rectification and appeals; thirdly there appears again to be no justifiable for difference of limitation periods for disposal of the refund applications especially those arising from appellate Orders and for the review/rectification of such appellate orders. The CBIC Circulars again limit the period for sanction/disposal of the refund by providing different time limitation of scrutiny of the refund applications and sanction within 60 days.
All these limitation periods need review to align these so as to ensure conformity for rectification, appeal, review and refund disposal etc.
A small advice of caution to the Revenue Officers- they need to shed their mind-set of being in safe heaven by passing pro-revenue orders. There ought to be only single approach – neither pro nor anti revenue (or taxpayer), but only pro-law. This approach is good for the taxpayers and the government, and the officials & tax consultants as well. Again, the ups and downs are natural and integral part of human life and humanity is supposed to withstand and learn from them.
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