Understanding the Implications of the Kerala High Court’s Decision on Extension of Limitation for Issuance of Show Cause Notice

Introduction:

In a recent landmark case, Faizal Traders Private Limited v. Deputy Commissioner, Central Tax and Central Excise, Palakkad, the Hon’ble Kerala High Court deliberated on the validity of Notifications extending the period of limitation for the issuance of Show Cause Notices under Section 168A of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). This article aims to dissect the facts of the case, explore the pertinent issue, and analyze the court’s decision.

Facts of the Case:

Faizal Traders Private Limited, operating in the IHK Service to the southern railway and supplying Top-up Coupon and Recharge Coupon of M/s. BSNL as a Franchisee, contested an assessment order-in-original dated June 21, 2023 (“the Impugned Order”). The Petitioner argued that the Impugned Order was barred by limitation and challenged Notification No. 13/2022-Central Tax dated July 05, 2022, and Notification No. 09/2023-Central Tax dated March 31, 2023 (“the Impugned Notifications”), which extended the time limit for the Revenue Department to issue Show Cause Notices.

Issue:

The central issue before the court was whether the Revenue Department had the authority to issue Notifications for extending the period of limitation under Section 168A of the CGST Act due to COVID-19 for the issuance of Show Cause Notices.

Held:

The Hon’ble Kerala High Court, in WP (C) No. 24810 of 2023, upheld the validity of the Impugned Notifications and dismissed the writ petition challenging them. The court observed that the Notifications were issued by the Central Government based on the recommendations of the GST Council, considering the impact of the COVID-19 pandemic on the Department’s operations. Noting the recommendation, the court highlighted that the limitation under Section 73 of the CGST Act was extended for the FY 2017-2018 until September 30, 2023, pursuant to the powers envisaged under Section 168A of the CGST Act, 2017. The court opined that the government had the authority to extend the limitation period for conducting proceedings under Section 73 of the CGST Act through the issuance of the Impugned Notifications, considering COVID-19 as a force majeure event.