Revenue's Delayed Internal Communication Of GST Orders Cannot Extend Appeal Limitation: Karnataka High Court

The Karnataka High Court has held that the Revenue cannot extend the statutory limitation for filing a GST appeal by relying on delayed intra-departmental communication of an adjudication order.

It held that the limitation period has to be reckoned from the issuance of the order and cannot be left open-ended.

A Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha observed that Section 107(2) of the CGST Act gives the Revenue six months from the communication of the adjudication order to apply to the appellate authority, while Section 107(4) permits condonation of delay only for a further period of one month.

The Court held that departmental post-audit or administrative communication cannot postpone the commencement of the limitation period.

"...the post-audit and review has to be conducted within the period of 3 months from the date of the issue of Form GST RFD-06 order and the findings have to be communicated to the review branch within the said period...", it said.

The case concerned Jeans Knit Private Limited, a 100% Export Oriented Unit engaged in manufacturing and exporting garments.

The assessee had claimed refund of accumulated and unutilised ITC for July to December 2017, and six refund orders were passed between January and March 2018, sanctioning a total refund of ₹33.88 crore.

The refund orders were subsequently reviewed by the Commissioner under Section 107(2) of the CGST Act. The Revenue took the view that the assessee had wrongly claimed refund of ITC relating to capital goods and authorised appeals before the Commissioner (Appeals). The Revenue also sought condonation of delay.

The Commissioner (Appeals) rejected the assessee's objection that the appeals were time-barred. It held that the appeals arose from a post-audit exercise and that the Revenue could also recover an erroneously granted refund under Section 73 of the CGST Act. It further held that the delay was within the condonable period under Section 107(4).

The Single Judge subsequently held that the Revenue's appeals were barred by limitation. The Revenue challenged that decision before the Division Bench.

The High Court upheld the Single Judge's decision, noting that Section 107(2) requires the Revenue's appeal to be filed within six months from the date of communication of the adjudication order.

The Court held that the date of audit or the date on which audit objections are raised is irrelevant for determining limitation.

The Bench also rejected the Revenue's contention that the refund orders were communicated several months after they were issued.

It noted that the refund orders are required to be transmitted online to the review module and that the CBIC's instructions require post-audit to be completed within three months of issuance of the refund order, with the review to be completed at least 30 days before expiry of the period for filing an appeal.

The Court relied on the Delhi High Court's decision in Grapes Digital Pvt. Ltd. v. Principal Commissioner, holding that, in the context of intra-departmental communication, the expression "communication of the decision or order" under Section 107(2) has to be construed as the date of issuance of the order.

The Bench further referred to Section 169(1)(d) of the CGST Act, which provides for service by making a decision or order available on the common portal, and held that the statutory scheme does not permit the period of limitation to be made indeterminate by delayed internal communication.

"Given the scheme of the CGST Act, we are unable to accept that the time period for communication of the order can be considered as indeterminate or left open-ended.", the Court observed.

The Court also rejected the argument that the Revenue could rely on the recovery provisions under Sections 73 or 74 to extend the limitation for filing an appeal. It held that the question whether an erroneously granted refund could otherwise be recovered is irrelevant to determining whether an appeal under Section 107 was filed within limitation.

It further held that the Commissioner (Appeals) had no jurisdiction to condone a delay beyond the additional one-month period prescribed under Section 107(4), observing that the delay in the present case far exceeded that period.

The Division Bench accordingly dismissed the Revenue's appeal and upheld the order holding the Revenue's appeals to be barred by limitation.

For Appellant: Aravind V. Chavan, CGC

For Respondent: B.G. Chidananda Urs, Advocate