Issuance of fresh SCN for FY 2017-18 under Section 73 – has the time limit extended?

 Whether limitation period for issuing show cause notice under Section 73 for FY 2017-18 has really been extended?

The Government has issued a Notification No. 09/2023 issued in March 2023 in exercise of its powers under Section 168A of the CGST Act through which limitation for passing an order under Section 73 for the year 2017-18 has been extended till 31^st December 2023. Department is of the view that as the Order can be passed till 31^st December 2023, they are empowered to issue a SCN under Section 73 on or before 30^th September 2023.

Notification No. 09/2023 is modifying three previous Notifications (i) Notification No. 35/2020, (ii) Notification No. 14/2021 and (iii) Notification No. 13/2022. All these three Notification have been issued under Section 168A. Therefore, it is important to understand the background of Section 168A. This is a provision which was enacted first as an Ordinance on 31^st March 2020 [i.e. at the time of first lockdown] to empower the Government to extend limitation period expiring or at near expiry during the lockdown. Later on, in September 2020 the Ordinance was converted into an enactment. The reason for enacting this provision was to extend the period of limitation beyond what is prescribed under the Act. Had this provision not been enacted, the Notification extending prescribed limitation period beyond the sections would have been ultra vires to the Act.

Now coming back to the main issue.

The due date for furnishing annual return for the F.Y. 2017-18 was extended to 5^th February 2020 vide Notification No. 06/2020 – Central Tax dated 03.02.2020. Therefore, as per Section 73(2), a Show Cause Notice could have been issued on or before 4^th November 2022 [i.e. 33 months] and the Order can be passed on or before 4^th February 2023.

Thereafter, due to Covid Government had issued Notification No. 35/2020 [as amended by Notification No. 55/2020] in exercise of its powers under Section 168A of CGST Act which provides that any time limit for completion/ compliance of any action [including notice or an order] under the Act which falls during the period from 20^th March 2020 to 30^th August 2020 has been extended till 31^st August 2020. Reference is drawn to Notification No. 35/2020 [as amended vide Notification No. 55/2020] has been extracted below:

In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of Union Territory Goods and Services Tax Act, 2017 (14 of 2017), in view of the spread of pandemic COVID-19 across many countries of the world including India, the Government, on the recommendations of the Council, hereby notifies, as under,-

(i) where, any time limit for completion or compliance of any action, by any authority or by any person, has been specified in, or prescribed or notified under the said Act, which falls during the period from the 20th day of March, 2020 to the 30th day of August, 2020, and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action, shall be extended up to the 31st day of August, 2020, including for the purposes of--

(a) completion of any proceeding or passing of any order or issuance of any notice………..

The limited scope of this Notification was to extend the time limit for those actions which are getting expired between March 2020 to August 2020.

It is interesting to note that before issuance of this Notification No. 35/2020, the time limit for filing of Annual Return for FY 2017-18 stood extended in February 2020. Thus, this Notification does not apply on a Notice / Order for FY 2017-18 considering its limitation was not expiring during the period prescribed under the Notification.

Similarly, Notification 14/2021 [as amended by Notification No. 24/2021] extends the time limit for compliance/ actions expiring between 15^th April 2021 to 29^th June 2021 to 30^th June 2021 [i.e. during the second wave of covid]. However, as explained above, issuance of fresh Show Cause Notice for the year 2017-18 does not fall within this period. Reference is invited to the relevant portion of Notification No. 14/2021 [as amended vide Notification No. 24/2021]:

In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act), read with section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), and section 21 of Union Territory Goods and Services Tax Act, 2017 (14 of 2017), in view of the spread of pandemic COVID-19 across many parts of India, the Government, on the recommendations of the Council, hereby notifies, as under,-

(i) where, any time limit for completion or compliance of any action, by any authority or by any person, has been specified in, or prescribed or notified under the said Act, which falls during the period from the 15th day of April, 2021 to the 29th day of June, 2021, and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action, shall be extended upto the 30th day of June, 2021, including for the purposes of--

(a) completion of any proceeding or passing of any order or issuance of any notice…

Further, Notification No. 13/2022 is modifying the previous two Notification i.e. Notification 35/2020 and Notification 14/2021. Similarly, Notification No. 9/2023 is modifying before mentioned all three notifications. All these notifications, as mentioned earlier, are issued under Section 168A i.e. for a specific purpose - to save limitation due to force majeure like COVID. Reference is invited to relevant portion of Notification No. 13/2022 and Notification No. 9/2023:

Notification No. 13/2022 - Central Tax dated 05.07.2022

In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act)………… and in partial modification of the notifications of the Government of India in the Ministry of Finance (Department of Revenue), No. 35/2020-Central Tax……and No. 14/2021-Central Tax, dated the 1st May, 2021…., on the recommendations of the Council, hereby,-

(i) extends the time limit specified under sub-section (10) of section 73 for issuance of order under subsection (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, in respect of a tax period for the financial year 2017-18, up to the 30th day of September, 2023;

Notification No. 09/2023- Central Tax dated 31.03.2023

In exercise of the powers conferred by section 168A of the Central Goods and Services Tax Act, 2017 (12 of 2017)…………. and in partial modification of the notifications of the Government of India, Ministry of Finance (Department of Revenue), No. 35/2020-Central Tax, dated the 3rd April, 2020….and No. 14/2021-Central Tax, dated the 1st May, 2021…….and No. 13/2022-Central Tax, dated the 5th July, 2022….., the Government, on the recommendations of the Council, hereby, extends the time limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilised, relating to the period as specified below, namely:-

(i) for the financial year 2017-18, up to the 31st day of December, 2023;

(ii) for the financial year 2018-19, up to the 31st day of March, 2024;

(iii) for the financial year 2019-20, up to the 30th day of June, 2024.

Now the short point is once the main Notification [i.e. Notification No. 35/2020 and No. 14/2021] does not apply for fresh notice / order to be passed under financial year 2017-18, the subsequent notifications [i.e. Notification No. 13/2022 and Notification No. 09/2023] which are modifying the previous notifications, are also not applicable.

In any case, there were no compelling reasons to issue a notification under Section 168A in July 2022 and March 2023. As a matter of fact, CBIC has specifically issued Instruction dated 21^st August 2020 to its officers to conduct all hearings online. Further, CBIC issued a Circular in July 2021 clarifying its stand that all adjudication proceedings need to be carried out in a time bound manner as adjudication proceedings are not extended by suo-moto Order of Hon’ble Supreme Court which only applies to limitation for petitions/ applications/suits/appeals/all other proceedings. Again, an Instruction was issued in September 2021 directing the officers to timely issue SCNs and pass orders as per the date of annual return.

Therefore, in my view, Notification No. 13/2022 and Notification No. 09/2023 cannot be used by the officers to issue fresh SCNs at the last second.

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