MAY 01, 2020

By Raghavan Ramabadran - Partner, Charulatha Rajaji - Senior Associate & Raghav Rajeev - Associate, Lakshmikumaran & Sridharan

Introduction:

WE have witnessed cases in the recent past ¹ wherein the Appellate Authority of Advance Ruling ("AAAR") has ruled that the appeal filed beyond the condonable period prescribed under Section 100(2) of the Central Goods & Services Tax Act, 2017 ("CGST Act") is time-barred. This has huge ramifications as the decision by the Authority for Advance Ruling, as per Section 103 of the CGST Act, is binding on the said Applicant unless there is change in circumstances or the law supporting such decision.

This article seeks to examine the legality of the AAAR's decision in dismissing the appeal as time-barred and to understand the legal recourse available to the Applicant in such a scenario.

Background:

In the case of Deputy Conservators of Forests, Bangalore ² ("DCF case"), the Applicant suffered an adverse ruling from AAR, Karnataka on their liability to pay GST on service of "logging". Against the same, the Applicant filed an appeal before AAAR under Section 100 of the CGST Act.

As per Section 100(2) of the CGST Act, the time limit prescribed for filing an appeal is 30 days from the date of receipt of the AAR's decision. Under the proviso therein, a further condonable period of 30 days is also prescribed provided the Applicant shows there is sufficient cause for the delay. In the DCF case, the appeal was dismissed by AAAR as it was filed beyond the condonable period under the proviso to Section 100(2) of the CGST Act. It held that there is no power empowering the authorities under Section 100(2) of the CGST Act to condone delay beyond the period of 30 days.

Whether AAAR's decision is in accordance with the ratio laid down by Hon'ble Supreme Court?

The Hon'ble Supreme Court in the case of Singh Enterprises vs Commissioner of Central Excise, Jamshedpur ³ ("Singh Enterprises case") had held that an Appellate Authority, being a creature of the Statute, is empowered to condone a delay of only the period expressly provided in the Statute.

In the Singh Enterprises case, the assessee argued that even if an appeal is barred by limitation under a specific enactment, the delay ought to be condoned on application of Section 5 of the Indian Limitation Act, 1963 ("Limitation Act"). Section 5 of the Limitation Act, enables an appeal to be entertained by the Court even after prescribed period of limitation if sufficient cause is provided by the appellant on why appeal was not filed during the said period. The Hon'ble Supreme Court rejected this submission of Assessee and held that once there is a specific time limit prescribed in a Statute, there is complete exclusion of Section 5 of the Limitation Act. Hence, the Appellate Authorities' power to condone delay cannot be expanded beyond the Statutory limitations.

It is relevant to note that the law laid down by the Hon'ble Supreme Court in the Singh Enterprises case was again followed in a subsequent decision of the Hon'ble Supreme Court in the case of Commissioner of Customs and Central Excise vs Hongo India (P) Ltd ⁴ . The issue for consideration was whether the High Court can invoke Section 5 of the Limitation Act in order to entertain a reference application presented by the Department beyond the period prescribed under Section 35H of the Central Excise Act, 1944 ("CEA, 1944"). It was urged by the Department that in absence of a specific exclusion of the provisions of the Limitation Act in the CEA, 1944, the High Court being the superior court on record have inherent and plenary power to exercise jurisdiction on the reference application filed. However, this submission was rejected by the Hon'ble Supreme Court on the ground that the language used in Section 35H of the CEA, 1944 is clear and absolute in stating that a reference to the High Court should be made within the time period of 180 days. That being the case, Limitation Act cannot be pressed into service. Thus, it held that the reference filed beyond time-period prescribed is liable to be dismissed as time-barred.

The aforesaid principles laid down by the Hon'ble Supreme Court will be applicable under GST regime as well. According to Proviso of Section 100(2) of the CGST Act, the Appellate Authority if satisfied that the appellant was prevented by a sufficient cause from presenting the appeal within the said period of thirty days, allow it to be presented within a further period not exceeding thirty days. The key phrase employed in this particular provision is "not exceeding thirty days", thereby signifying the intention of the Legislature to limit the power of the Appellate Authority, a creature of the Statute, to condone delay for a period not beyond 30 days.

Therefore, the decision rendered by AAAR in the DCF case in not condoning the delay beyond the period of 30 days is completely in line with the ratio laid down by the Hon'ble Supreme Court.

Legal remedy after exhaustion of statutory remedies:

While the decision of the AAAR in rejecting the appeal filed after the limitation period prescribed under the Statute is legally sound, it does not completely foreclose the assessee from seeking a legal remedy against the judiciousness of the original AAR's decision.

This issue arose before Hon'ble Gujarat High Court, in the case of Panoli Intermediate (India) Pvt. Ltd. v. Union of India. ⁵ The question before the Court was whether an assessment order passed under the CEA, 1944, be challenged in a Writ Petition under Article 226 of the Constitution even after exhausting the statutory appeal remedy. The Court held that the powers under Article 226 of the Constitution cannot be whittled down by any Statute. While holding so, it also drew a line of caution by stating that Writ jurisdiction should not be converted into an Appellate jurisdiction, resulting in re-appreciation of evidence or correction of errors. In order to determine the extent of judicial interference in these matters, it laid instances in which the Writ jurisdiction can be entertained:

1. The orders passed by the authority without jurisdiction or by erroneous assumption of jurisdiction; or

2. The authority exercising the power in excess of the conferred jurisdiction and by overstepping or crossing the limits of such conferred jurisdiction; or

3. The authority having acted in flagrant disregard to law or rules or procedure or acted in violation of principles of natural justice where no procedure is specified.

It was also held by the Court that the principle of res judicata is not applicable as the statutory appeals were dismissed only on technicalities of limitation and not on merits.

This decision was subsequently followed by Hon'ble Andhra Pradesh High Court in Electronics Corporation of India Ltd. v. Union of India ⁶, Hon'ble Madras High Court in Rane NSK Steering Systems (P) Ltd. v. Assistant CCE, Rajakilapakkam ⁷ and Hon'ble Karnataka High Court in Phoenix Plasts Co. v. CCE, Bangalore. ⁸

In the DCF case for instance, one of the grounds taken by the Applicant in the appeal before AAAR was violation of principles of natural justice, stating that they were not given opportunity to make their submissions in writing nor were they heard before passing an adverse order. It may be argued that this situation is squarely covered under the instances laid out in the Panoli Intermediate case, for approaching High Court under Article 226 of Constitution.

The question of lack of jurisdiction may not usually arise in the case of AAR decisions. However, instances of giving any adverse finding beyond the questions put forth for an advance ruling, thereby exceeding its jurisdiction, palpable and blatant errors in application of law to the given facts for arriving at the decision and violation of principles of natural justice are tenable grounds for exercising High Court's jurisdiction under Article 226 of the Constitution.

It is important to keep in mind that this remedy under Article 226 of the Constitution is not available against every AAR decision. It is restricted in scope, as laid down in the Panoli Intermediate case. To put it simply, it is the decision-making process of the AAR which is susceptible to this jurisdiction and not the merits of the decision arrived at. This jurisdiction of the High Court ought to be looked at with a view to revive and thrust life into matters that are similar to DCF case, which are otherwise long gone.

Distinction between Singh Enterprises case and Panoli Intermediate case:

It is important to highlight the distinction between the ratio laid down in Singh Enterprises case and the Panoli Intermediate case. In the former, the issue pertained to whether an appellate authority can condone delay even beyond the outer time limit prescribed under the Statute whereas in the latter, the issue pertained to power under Article 226 of Constitution to test the legality of the original order itself. In other words, in Singh Enterprises case, the challenge was to the Appellate order dismissing the appeal on grounds of delay, while in Panoli Intermediate case it was against the original order. The power of Appellate authorities to entertain appeal beyond time prescribed was not questioned in the Panoli Intermediate case. This was also duly brought out by the Hon'ble Gujarat High Court in the Panoli Intermediate case.

Conclusion:

The scheme of statutory appeal against Authority for Advance Ruling under the GST regime being similar to the erstwhile indirect tax laws, the ratio of decisions discussed above will be applicable on all fours to them. Therefore, even though the door of statutory appeal is sealed off permanently, there lies a window of opportunity to explore a judicial remedy through a Writ Petition under Article 226 of the Constitution!

[The views expressed are strictly personal.]

¹ Malli Ramalingam Mothilal Nue Tech Solar Systems Private Limited - 2019-TIOL-62-AAAR-GST

² 2020-TIOL-17-AAAR-GST

³ 2007-TIOL-231-SC-CX

⁴ 2009-TIOL-48-SC-CX-LB

⁵ 2015-TIOL-2448-HC-AHM-CX

⁶ 2018-TIOL-484-HC-AP-CX-LB

⁷ 2019-TIOL-326-HC-MAD-CX

⁸ 2016-TIOL-905-HC-KAR-CX