In a recent ruling, the Madras High Court has granted a reprieve to SRM Engineering Construction Corporation Limited, allowing them to file a statutory appeal for a GST-related issue despite the expiration of the limitation period. The court considered the company’s explanation that it could not access the GST portal promptly due to a decline in business and staff turnover. This article provides a comprehensive analysis of the court’s decision and the circumstances that led to it.
1. Background of the Case:
The case revolves around an assessment order dated 23.02.2023, which was issued in response to a notice (GST DRC 01) sent to the petitioner on 19.12.2022. The assessment order was a result of discrepancies in GSTR1 and GSTR 3B returns, as well as differences in Input Tax Credit (ITC) between GSTR 3B and GSTR 2A returns. Normally, the statutory period for filing an appeal would have expired on 22.05.2023, with an additional grace period until 22.06.2023.
2. Delay in Filing the Appeal:
The petitioner failed to file a statutory appeal before the Appellate Commissioner within the stipulated time frame. Instead, they initiated a writ petition on 21.08.2023, with a delay of 58 days. It’s worth noting that the Hon’ble Supreme Court had previously ruled, in Assistant Commissioner (CT) LTU, Kakinada and others vs. Glaxo Smith Kline Consumer Health Care Limited (2020), that orders could not be challenged through Article 226 of the Constitution of India beyond the statutory limitation period. However, the court decided to consider the petitioner’s case.
3. Explanation for the Delay:
The petitioner provided a reasonable explanation for the delay in their affidavit. They explained that their business had been on a declining trend, and many of the employees who were active before 2020 had left the company. Additionally, the company’s operations primarily revolved around selling completed projects, land stock, and collecting overdue receivables, depending on the activities of group concerns. Due to these factors, the company’s new and limited staff did not frequently access the GST portal to check the “notices and orders” tab. As a result, the notice issued on 19.12.2022, along with the subsequent assessment order on 23.02.2023, went unnoticed until they manually received a recovery notice on 24.07.2023. Upon realizing the demand, the company promptly filed a representation on 27.07.2023, but the respondent did not consider it and issued an urgent notice on 03.08.2023.
4. Court’s Decision:
Taking into account the explanation provided by the petitioner, the court condoned the delay in filing the appeal. The court ordered the petitioner to file a Statutory Appeal within 30 days from the date of receiving a copy of the order. The Appellate Commissioner was instructed to process the appeal and make a decision on its merits. The court emphasized that the petitioner should pre-deposit the requisite amount as per Section 107 of the GST Act, 2017, and their arguments would be heard before such an order is passed.
The Madras High Court’s decision in this case demonstrates its willingness to consider valid explanations for delays in filing statutory appeals. The court’s decision reflects an understanding of the challenges businesses may face, such as employee turnover and changes in operational dynamics. It reinforces the principle that justice should not be denied solely due to procedural limitations, especially when reasonable justifications are presented.
The Madras High Court’s decision serves as a reminder that the judiciary can exercise discretion when assessing the validity of appeals filed outside the limitation period. In this case, the court acknowledged the practical challenges faced by the petitioner and allowed them to proceed with their statutory appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Mrs. K. Vasanthamala, learned Government Advocate takes notice on behalf of the respondent.
2. The petitioner has challenged the impugned Assessment order dated 23.02.2023. The impugned order preceeds notice issued in GST DRC 01 on 19.12.2022. The petitioner however failed to respond to the same and therefore on account of the mis-match between the GSTR1 and GSTR 3B and also difference in ITC between GSTR 3B and GSTR 2A, the impugned order has been passed.
3. Normally period of limitation for filing an Appeal would have expired on 22.05.2023. With a further grace period of 30 days, the last date for filing an appeal would have expired on 22.06.2023.
4. The petitioner has thus not filed a Statutory Appeal before the Appellate Commissioner under Section 107 of the GST Act and in view of the decision of the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others Glaxo Smith Kline Consumer Health Care Limited, 2020 SCC Online SC 440. The petitioner has now filed this writ petition on 21.08.2023 with a delay of 58 days. Although the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others Vs. Glaxo Smith Kline Consumer Health Care Limited, 2020 SCC Online SC 440. has declared that orders cannot be challenged under Article 226 of the Constitution of India beyond the statutory period of limitation for filing appeal, Court is inclined to dispose this writ petition.
5. The explanation given by the petitioner in the affidavit filed in support of the present writ petition in para 7 appears to be reasonable. It reads as under:
“7.It is submitted the business was on decline trend, and also the staffs who were active during the period of operation prior to 2020 also left the company. The company is in existence mostly to sell the completed works, land stock and to collect its overdues receivable and also the business which depends upon the group concerns activity. In that process, the company did not frequently logged in the GST portal by the new and few employees of the company to visit the “notices and orders” tab. In that process, the uploading of GST DRC – 01 dated 19.12.2022 and subsequently the impugned order dated 23.02.2023 was not noticed in the GST portal by the new staff of the company. The company came to know there was a demand against them only when they manually received the recovery notice dated 24.07.2023. Immediately, the petitioner company filed a representation dated 27.07.2023 and also acknowledged by the respondent. In the representation, the petitioner company elaborately explained that there is no difference in the turnovers between GSTR 1 and 3B and also difference in ITC between GSTR 3B and 2A and whatever differences were paid by the company. However, the respondent did not consider the representation and again issued a urgent notice dated 03.08.2023 received by the petitioner on 07.08.2023.”
6. Considering the above, the delay in filing the appeal is condoned. The petitioner is directed to file a Statutory Appeal within a period of 30 days from the date of receipt of a copy of this order. The Appellate Commissioner shall number the appeal and dispose the same on merits in its turn.
7. Needless to state, the petitioner shall pre-deposit the amount that is required to be pre-deposited in terms of Section 107 of the GST Act, 2017. Before passing such order, the petitioner shall also be heard.
8. This writ petition stands disposed of. No costs.
Consequently, connected writ miscellaneous petitions are closed.