Demand stayed; prima facie case against extended limitation period for SCN issuance under Notifications 9/2023-CT and 56/2023-CT.

Issue: Whether the show cause-cum-demand notice issued under Section 73 for the tax period April 2019 to March 2020 on April 30, 2024, is time-barred, given the assessee’s contention that the reliance on Notification Nos. 9/2023-CT and 56/2023-CT (issued under Section 168A for extending time) was an invalid exercise of power and that no force majeure event was prevailing.

Facts:

The show cause-cum-demand notice under Section 73 was issued on April 30, 2024, for the tax period April 2019 to March 2020.
The assessee argued that at the time of issuance, there was no force majeure event that would justify the extension of the limitation period.
The assessee contended that the respondents improperly relied on Notification Nos. 9/2023-CT and 56/2023-CT, issued under Section 168A, to extend the time for initiating proceedings in April 2024.
The assessee claimed that these notifications, as well as the impugned show cause notice and adjudication order, were issued in a “colourable exercise of power,” and a valuable right (of limitation) had already accrued in their favor.
The assessee sought a stay on the operation of the order and the consequential demand.

Decision: The writ petition was accepted for hearing as a “jurisdictional issue” had been raised. An affidavit-in-opposition to the writ petition was directed to be filed. Importantly, the impugned demand was stayed.

Key Takeaways:

Jurisdictional Issue: The core contention regarding the validity of extending the limitation period through specific notifications in the absence of force majeure constitutes a jurisdictional issue, which courts are willing to examine in writ petitions.
Colourable Exercise of Power: The argument that the notifications and subsequent actions were a “colourable exercise of power” implies that the authority acted beyond or misused its statutory powers, which is a strong ground for judicial review.
Accrued Right: The concept that a valuable right (in this case, the expiry of the limitation period) had already accrued in favor of the assessee is a significant legal argument.
Interim Relief (Stay): When a strong prima facie case regarding a jurisdictional defect or a violation of a valuable right is made out, courts often grant interim relief, such as a stay on the demand, pending the final adjudication of the writ petition.
Burden on Revenue: The directive for the revenue to file an affidavit-in-opposition indicates that they will need to justify their actions and the validity of the relied-upon notifications in light of the assessee’s arguments.

HIGH COURT OF CALCUTTA

Anmol Stainless (P.) Ltd.

Deputy Commissioner of State Tax, Serampore Charge

Raja Basu Chowdhury, J.

WPA No. 2103 of 2025

MAY 5, 2025

Ankit Kanodia, Ms. Megha Agarwal, Ms. Tulika Roy and Piyush Khaitan, Advs. for the Petitioner. Kaushik Dey, K. K. Maiti, T. Chakraborty, S. Shaw, S. Sanyal, A. Ray, Ld. GP and T. M. Siddiqui, A.G.P. for the Respondent.

ORDER

1. Affidavit-of-service filed in court today be taken on record.

2. Mr. Kanodia learned advocate appearing for the petitioner, by placing reliance on the notifications dated 31^st March, 2023 and 28^th December, 2023 submits that the Central Board of Indirect Taxes and Customs by the aforesaid notifications have extended the time limit as specified in Section 73(10) of the WBGST/CGST Act, 2017 (herein referred to as the “said Act”) for issuance of the order under Section 73(9) of the said Act for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, relating to then period as specified in the said notifications.

3. By referring to Section 168A of the said Act the petitioner claims that the said section has been introduced with effect from 31^st March 2020, whereunder a power has been conferred on the government to extend the time limit prescribed or notified under the Act in special circumstances in respect of actions which cannot be completed or complied with due to force majeure. By referring to the order dated 27^th August 2024, it is submitted that the show cause cum demand notice under Section 73 of the said Act was issued on 30^th April, 2024 in respect of the tax period April 2019 to March 2020. Since, there was no force majeure prevailing then, the respondents could not have relied on the aforesaid notifications for extending the time for initiation of proceeding in April 2024. According to the petitioner the aforesaid notifications as also the aforesaid show cause notice and the adjudication order had been issued in colourable exercise of power. A valuable right has already accrued in favour of the petitioner. In such circumstances, Mr. Kanodia prays for stay of operation of the aforesaid order and the consequential demand.

4. Mr. Siddiqui, learned advocate appearing on behalf of the State GST authorities submits that the present writ petition cannot be decided without calling for affidavits. He submits that the respondents should be granted opportunity to file affidavit-in-opposition.

5. Having regard to the aforesaid and since a jurisdictional issue has been raised, the writ petition shall be heard. Let affidavit-in-opposition to the present writ petition be filed within a period of four weeks from date. Reply thereto, if any, be filed within three weeks thereafter.

6. Taking into consideration the fact that a prima facie case has been made out by the petitioner, and the fact that a coordinate Bench of this Court by an order dated 13^th February, 2024 in an identical matter in the case of OSL Exclusive (P.) Ltd. v. Union of India [2024] 165 taxmann.com 652 (Calcutta)/(2024) 21 Centax 400 (Cal.)/2024 SCC OnLine Cal 2826 had been pleased to pass a limited interim order, I propose to stay the impugned demand made in the order dated 27^th August, 2024 as appearing at annexure P-6 to the writ petition till the end of December 2025 or until further order, whichever is earlier.

7. Liberty to mention after expiry of the period for exchange of affidavits.