1.0 The aphorism “justice delayed is justice denied” is a well-known principle of the modern law and judicial system, but what about ‘Justice Disrupted’. What if decisions and orders, once deemed final, are dragged back into contention for reconsideration?
2.0 This is not the plot of a legal thriller but the troubling reality of the evolving sphere of GST law where settled cases are being reopened. The very idea of revisiting concluded matters challenges the sanctity of legal finality, eroding away the taxpayer’s confidence and the broader principle of ‘FINAL JUSTICE’.
3.0 In this exposition we shall explore how this practice undermines legal integrity, disrupts the economic environment and sets a perilous precedent.
4.0 The Doctrine of Legal Finality: The Cornerstone of Justice
The Doctrine of legal finality rests on the pillar of the principle that ‘All Litigations must have an end’. Perpetual Uncertainty in legal matters is antithetical to justice.
Reopening u/s 74 of the CGST Act, 2017 (herein referred to as the “Act”) of previously settled cases is against the principle of Natural justice and an unfair burden to the taxpayer.
Background:
As per the Prevailing Operational Paradigms followed by the Department many Assessees are being issued Notice u/s 74 of the Act for the recovery of Input Tax Credit and penalty. However, the issue under contention and the period to which the issue belongs has already been adjudicated by the Relevant authority under the GST law. Reopening of already adjudicated/settled cases is unwarranted; and no power or authority is bestowed to the proper officer by the GST law to do so.
5.0 Jurisdiction only for the review of order:
As per the provisions of ss (2) of Sec 107 of the Act, that the commissioner may review any decision or order, including an order of refund, with respect to its legality or propriety. The relevant text of the said provision is reproduced herewith:
* Section 107. Appeals to Appellate Authority.-
(2) The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified by the Commissioner in his order. (Emphasis is supplied on the highlighted portion).
The only power which has been enlisted in the Act is to review the order already passed by the Adjudicating Authority by the commissioner. However, the procedure laid out is, for the appeal by the department against the relevant order, not to reopen the order and do undue harassment to the taxpayer.
So, the only legal recourse available for the department against an order determined to be erroneous and prejudicial to the interest of the revenue is to appeal against the same.
6.0 Judicial Precedents: A Warning ignored
Indian courts have consistently emphasised the importance of legal certainty and fairness. For instance:
1. Jayanthi Plastics (Defunct) Vs Deputy State Tax Officer-2 (Madras High Court)-2024
Background: The petitioner, Jayanthi Plastics (Defunct), contested the reopening of an assessment under the GST framework. The matter had previously been adjudicated and resolved under the erstwhile VAT regime.
Key Issue: The primary contention was whether the authorities could reopen a settled case under GST for revisiting alleged discrepancies already addressed under the earlier tax law.
Court’s Observations:
- The court emphasized the principle of finality in taxation matters. It held that reopening previously settled cases, barring exceptional circumstances such as fraud or material misrepresentation, undermines the taxpayer’s right to certainty and closure.
- Reliance was placed on Section 84 of the Tamil Nadu VAT Act and analogous provisions in GST law, highlighting the legislative intent to limit reassessment to specific circumstances.
Judgment: The court ruled in favor of the petitioner, restraining the tax department from reopening the case. It reinforced that administrative convenience or procedural changes between VAT and GST cannot justify revisiting settled matters without new material evidence.
Conclusion: This judgment reinforces the sanctity of finality in taxation, preventing harassment of taxpayers through retrospective reassessments under GST.
2. The same decisions has been emphasised in various other judgement of Hon’ble Supreme court, and high courts throughout the nation, pertaining to the CENVAT era, some of which are reproduced herewith:
1. Eicher Motors Ltd. v. Union of India (1999): The Supreme Court emphasized the finality of assessments, asserting that reopening settled matters without new evidence undermines legal certainty and taxpayer confidence.
2. Paradeep Port Trust v. Sales Tax Officer (1999) 4 SCC 73: The Supreme Court observed that reopening concluded assessments without new or tangible material evidence amounts to a change of opinion, which is not permissible. This case highlights the necessity of substantial grounds for reassessment.
3. CIT v. Kelvinator of India Ltd. (2010) 2 SCC 723: Although pertaining to direct taxes, the principles laid down regarding the impermissibility of reopening assessments based on mere change of opinion are applicable to indirect taxes as well. The Court emphasized that there must be “tangible material” to justify the reopening of a settled assessment.
7.0. The Contradiction in Tax policies: Amnesty Scheme Vs. Reopening of Settled Cases:
The Indian Government has been making an admirable effort to resolve long-standing tax disputes through various Amnesty schemes. This initiative aims to provide relief to taxpayers by offering an easy way to settle disputes and close the chapter on prolonged litigation. But while this scheme spreads goodwill on one side, the actions of the Revenue to Reopen settled cases under the GST regime tells a contradictory story not aligning with the intentions of the Government.
So, the Revenue should align their effort and resources with the intention of the government on a proactive basis and follow the principle of legal finality and not reopen settled cases under GST.
8.0 The reopening of settled cases under GST while the proper officer doesn’t have the authority or power bestowed to him by the law and when the intention of the government says otherwise only results in prolonged litigations and drain of time and money of both taxpayer and revenue.
Revenue should try to avoid the avoidable litigation and hassles and so as to save the time and resources of both taxpayer and itself.
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