Can GST Show Cause Notice Time Limits Be Extended? SC to Decide

Introduction

The Supreme Court is set to decide whether the time limit for adjudicating a show cause notice (SCN) and passing an order can be extended via government notifications issued under Section 168A of the GST Act. This provision empowers the Government to extend time limits under special circumstances such as force majeure.

The case before the Supreme Court stems from conflicting High Court rulings regarding the legality of extending SCN adjudication timelines through notifications issued without GST Council recommendations. This ruling will have far-reaching implications for businesses, tax professionals, and GST litigants.

Legal Background: Section 168A of CGST Act

Section 168A(1) of the GST Act states:

“Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, by notification, extend the time limit specified in, or prescribed or notified under, this Act in respect of actions which cannot be completed or complied with due to force majeure.”

The primary legal debate is whether:

• Section 168A can override specific time limits prescribed in Section 73 (dealing with SCN adjudication).
• Notifications extending time limits must strictly be based on GST Council recommendations or if post-facto ratifications suffice.

Key High Court Rulings on the Issue

1. Telangana High Court’s Stand

• Petitioners challenged Notification Nos. 13/2022, 9/2023, and 56/2023, arguing that no force majeure conditions existed to justify an extension of time beyond the statutory limit.
• The Court ruled that notifications not recommended by the GST Council are invalid.

2. Allahabad High Court (Graziano Transmissions v. GST Dept.)

• Held that Supreme Court’s suo motu extensions for COVID-19-related limitations do not apply to GST proceedings.
• Declared that notifications extending SCN timelines without force majeure justification are unlawful.

3. Gauhati High Court (M/s. Barkataki Print v. UOI)

• Clarified that recommendation by the GST Council is a precondition for Section 168A notifications.
• Held that post-facto ratifications by the Council do not validate already issued notifications.

4. Patna High Court (M/s Barhonia Engicon v. Bihar State)

• Upheld time extensions under Section 168A, reasoning that the government needs flexibility to deal with unforeseen crises.

Arguments Before the Supreme Court

Petitioners’ Argument (Challenging the Notifications)

• No force majeure conditions existed in 2024-25 to justify time extensions.
• The GST Council did not recommend certain notifications, making them legally invalid.
• COVID-19 relaxations ended in February 2022, and later extensions lack justification.
• Supreme Court’s suo motu extension ruling should not be applied to GST proceedings.

Government’s Argument (Defending the Notifications)

• Section 168A allows time extensions for ‘actions’ that could not be completed due to force majeure, which includes adjudicating SCNs.
• The COVID-19 pandemic created extraordinary administrative delays beyond 2022.
• The GST Council’s ratification after issuance of notifications should be deemed valid.

Implications of the Supreme Court Ruling

If SC Rules in Favor of Taxpayers:

• Invalidates retrospective notifications extending time limits without GST Council recommendations.
• Provides relief to businesses facing delayed adjudication.
• Prevents arbitrary extensions beyond statutory timelines.

If SC Upholds Government’s View:

• Strengthens government’s authority to extend SCN adjudication deadlines in special circumstances.
• Creates precedent for future extensions under force majeure clauses.
• Potential backlog of tax litigation as more cases seek extended adjudication.

Key Takeaways for Businesses & Tax Professionals

1. Ensure timely responses to GST notices to avoid disputes over extended timelines.
2. Monitor Supreme Court’s final ruling for clarity on whether SCN adjudication deadlines can be extended via notifications.
3. Maintain compliance with prescribed GST timelines to prevent legal uncertainties.
4. Seek legal guidance if involved in an SCN adjudication case affected by past notifications.