[The Viewpoint] Relaxation of time limit for Indirect Tax statutes and its effect

Even as we move towards normalcy in social and economic activities post the COVID-19 pandemic, the confusion surrounding extensions available under various laws and rules remains.

The disruption in day-to-day work led to a breach of statutory timelines in a number of cases. Questions still exist over the applicability of certain extension orders to various compliances. In this article, we make an attempt to understand the applicability of extensions in timelines with respect to indirect tax laws.

The applicable extensions

Supreme Court’s extension order

Filing of appeals, petitions, applications, etc had started to go online in an attempt to adapt to the 'new normal’ effected by the pandemic. At this juncture, considering the difficulty faced by litigants, the Supreme Court ordered for the extension of the period of limitation in all proceedings before tribunals and courts. The apex court directed courts and tribunals to exclude the time from March 15, 2020 till further orders while calculating the period of limitation.

Due to the rise in COVID-19 cases during various waves, the said order dated March 23, 2020 has been extended time and again, and currently, is effective till February 28, 2022.

Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020

The onset of the pandemic also led to various taxpayers facing difficulty in going about their businesses. Understanding the same, the Union Ministry of Law and Justice promulgated the Taxation Relaxation of Provisions Ordinance, 2020, wherein relaxations of certain compliances/timelines were provided by extending the time limit. Initially, the due date for compliance for the period from March 20, 2020 to June 29, 2020 was prescribed as June 30, 2020. The extension under the Ordinance was applicable to Chapter VII of the Finance Act, 2004, The Central Excise Act, 1944, The Customs Act, 1962, and The Customs Tariff Act, 1975. On periodical analysis of the situation, the said limitation was further extended by various circulars and notifications from time to time. The Central Board of Indirect Taxes and Customs (CBIC), by its notification dated June 27, 2020, further extended the aforesaid time till September 30, 2020.

This extension was applicable for filing appeal, reply or application or furnishing any report, documents, return or statement under any of the aforementioned enactments. Further, a notification dated September 30, 2020 further extended the time limit till December 31, 2020, for completion or compliance of actions as specified under the enactments.

For Goods and Services Tax (GST), a specific provision under the Central Goods and Service Tax Act, 2017 was also introduced, viz. Section 168, which empowered the government to extend the time limit prescribed under the Act in case of force majeure. Appropriate notifications were issued under the same for various compliances. With regard to appeal and other similar proceedings, the extensions provided thereunder were available for activities which fell due from March 20, 2020 up to August 30, 2020, and the due date was prescribed as August 31, 2020.

The ambiguous clarification

Despite the tax ordinance being implemented, there remained uncertainty on various aspects. Taxpayers were confused on the scope of the Taxation Relaxation of Provisions Act and whether the Supreme Court's extension order would take precedence over the ordinance, as certain authorities rejected the appeals and applications filed by taxpayers on the ground of limitation.

With an intent to clear the air, the CBIC issued a circular providing the following clarification on the applicable limitation under GST laws in terms of the Supreme Court’s order dated April 27, 2021:

1. The limitation stands extended while calculating the limitation period(s) for filing appeals before any appellate authority under the GST Law. However, the said extension is not applicable to original adjudication.

2. The pending proceedings which are to be heard and disposed off were not affected by the extension order of the Supreme Court.
   

3. Further, the extension order passed by the Supreme Court does not apply to the scrutiny of returns, issuance of summons, search, enquiry or investigations and consequential arrest in accordance with GST.

4. Issuance of show cause notice, granting time for replies and passing orders were not covered under the Supreme Court extension order, Despite being quasi-judicial proceedings, the extension order applies only to petitions, applications, suits and appeals.

High Courts on the applicability of the relaxation

Since the High Courts and Tribunals were bound by the directions of the Supreme Court, various High Courts, while allowing the appeals and petitions filed by the assessees and taxpayers, provided their own interpretation of the apex court's extension order and held as follows:

1. In the case of an aircraft imported by the taxpayer on lease under a time-bound notification before COVID-19, the same could not be be re-exported due to the pandemic. The customs authorities directed the importer to pay the entire duty on the same, which would have ideally been paid at abated rate based on the time during which the aircraft remained in the country. The High Court of Karnataka allowed the petitioner to take benefit of the extended time limit for the fulfilment of conditions as laid down in the exemption notification. The High Court came to this conclusion based on the various notifications, circulars etc issued by the Central government and State government and the Supreme Court’s order in Suo Motu Writ Petition (Civil) No. 3/2020.
   

2. In Saiher Supply Chain Consulting Pvt Ltd v. Union of India, the petitioner before the Bombay High Court filed refund applications (first and second) for the period between July 2018 to September 2018 which were rejected on the ground of deficiency. Subsequently, the third application was rejected on the ground of being time barred. The High Court allowed the petition on the ground that the refund application is not time-barred in view of the Supreme Court’s order extending the time limit for filing applications under various laws.

However, the Supreme Court in Sagufa Ahmed, refused to provide benefit of its own suo motu extension order dated March 23, 2020. In the said case, on August 4, 2020, an appeal filed before the National Company Law Tribunal (NCLAT) against an order dated October 25, 2019, was dismissed on the ground of limitation. An appeal was filed before the Supreme Court citing the suo motu extension order dated March 23, 2020. The Supreme Court, while dismissing the appeal, held that the suo motu order was limited to the limitation period and does not extend to the grace period beyond which the Appellate Tribunal can condone delay in filing an appeal.

Conclusion

It is very hard to predict the actual effect of the tax ordinance and various clarificatory circulars and notifications issued by the department in light of the Supreme Court’s order extending the period of limitation. The scope of relaxation provided by the ordinance is still a moot point and the interpretation of the same is likely to be further litigated. It is very clear from the decisions of the Supreme Court and other High Courts that the decisions of extension of limitation are taken to meet the ends of justice and equality. At the same time, there is a possibility of assessees seeking benefits of these extensions including refund.

However, the one thing that is evident from the approach adopted by the courts is that they are taking a lenient view in favour of the assessees to provide relaxations. Whether the same will prompt stricter guidelines for application of the extension order is something to be seen.

Rishabh J is a Senior Associate with Shivadass & Shivadass (Law Chambers). The author would like to acknowledge the contributions of Sampath KM, Paralegal with Shivadass & Shivadass (Law Chambers).