GST Update No 132 on limitation extended by SC applicable for refunds

Digitization and work from home is the new normal amidst the current scenario after the outbreak of pandemic in the Country. As complete automation has not been effected for all the compliances in GST Law, the government has been kind enough to provide various relief to the trade and industry. Owing to the recent unprecedented spike in Covid-19 cases in recent times, the Apex Court vide its suo motu order dated 15.03.2020 extended the period for various compliances by the assessees under various Acts. However, it is observed that the orders of Courts are rarely followed wholeheartedly by the revenue department. Recently, an issue came before the hon’ble Bombay High Court in case of SAIHER SUPPLY CHAIN CONSULTING PVT. LTD. wherein the refund application of the petitioner was being rejected on the grounds of limitation inspite of the Suo Motu Extension Order passed by the Apex Court. The critical analysis of this decision is subject matter of our today’s update. In the present case, the petitioner applied for refund application after it was rejected twice on account of certain deficiencies being pointed out by the department. Thereafter, the department rejected the refund application filed third time on the grounds that it was time barred. The petitioner argued that the refund application is not time barred by placing reliance on the Supreme Court’s suo motu order of extension of time limit for various compliances. It was ordered by the Hon’ble Supreme Court that the limitation period in all proceedings whether condonable or not shall stand extended w.e.f. 15.03.2020 till 01.10.2021. Therefore, the period from 15.03.2020 to 02.10.2021 shall stand excluded for the purpose of computing limitation period for various compliances under various laws. To add on further, as the events are rolling down the line, India is witnessing a sudden sharp rise in Covid-19 cases, the Hon’ble Supreme Court decided to restore the Limitation Extension period up to 28.02.2022. This order shall be binding on all the Courts/ Tribunal and Authorities as defined in Article 141 of the Constitution of India. The petitioner argued that since refund application was filed within the extended period, it should be considered for decision onmerits. Reliance was also placed on the decision of Hon’ble Madras High Court in case of M/S. GNC INFRA LLP VS. ASSISTANT COMMISSIONER (CIRCLE), wherein it was held that period of limitation shall stand extended in case of refund applications also. The Counsel of Revenue contended that refund application is to be filed within a period of 2 years as per Circular dated 18.11.2019. Since, it was filed beyond a period of 2 years, refund application stands rejected. The Court followed the Supreme Court’s suo motu order and held that period from 15.03.2020 to 02.10.2021 stands excluded in case of any suit, appeal, application and proceedings. Consequently, balance period from 03.10.2021 shall be available. As the refund application fell between the aforesaid period i.e. from 15.03.2020 to 02.10.2021, the application stands approved. Thus, The Hon’ble High Court quashed the order rejecting the refund claim as time barred. The above decision taken by the Apex Court has proved to be a silver lining in the cloud for the taxpayers as it seeks to grant relief to the assessee by following the Apex Court extension order strictly. The provision is beneficial to the assessees indirectly as the extension is only for proceedings in Courts/Tribunals and not for adjudication of the cases. Hence, although the time limit for filing refund applications have been extended but the officers cannot take shelter of this Apex Court order for delay in passing orders. The orders in case of refund applications will continue to be mandatorily passed within the stipulated time period. Consequently, the working capital and liquidity of the assessees will not be adversely effected. However, extension is not applicable for all the compliances. To illustrate, filing of revocation of registration application is not expressly covered by the extension order which is irrational as it would result into closure of business of the taxpayers. Moreover, nonrestoration of the cancelled registrations will also result in reduction of tax base for the Government as well. To conclude, the above suo motu order should have been applied to all the areas of compliances not restricting its scope to judicial/quasi-judicial proceedings so that there can be a “win-win” situation for the assessees.

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GST Update No 132 on limitation extended by SC applicable for refunds

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