In a significant judgment emphasizing adherence to statutory limitations, the Allahabad High Court, Lucknow Bench, quashed recovery orders issued by the Uttar Pradesh State Tax Department against M/s A.V. Pharma. The court held that the orders, being issued beyond the time limit prescribed under the Uttar Pradesh Goods and Services Tax (U.P.G.S.T.) Act, 2017, were void, and that subsequent notifications could not retrospectively extend a statutory deadline that had already expired.
The case was heard by a division bench comprising Justice Rajan Roy and Justice Manish Kumar in Writ Tax No. 264 of 2024. The petition was filed by M/s A.V. Pharma, represented through its proprietor, Smt. Madhu Vohra, against the State of Uttar Pradesh and the Deputy Commissioner, State Tax, Sector-5, Lucknow.
Background
The petitioner contested two key orders: one issued on December 2, 2023, and another on October 5, 2024, both concerning the financial year 2017–18. These orders pertained to tax assessments and the freezing of two bank accounts belonging to M/s A.V. Pharma under the provisions of the U.P.G.S.T. Act.
Represented by advocates Anuj Kudesia and Anurag Tyagi, the petitioner argued that the orders were in violation of Section 73(10) of the Act, which mandates a three-year time limit from the due date of filing annual returns for issuing such orders. For the financial year 2017–18, the due date for filing annual returns, initially set for December 31, 2018, had been extended to February 5, 2020. Consequently, the statutory deadline for passing orders under Section 73(10) expired on February 5, 2023.
The tax department, represented by the Additional Chief Standing Counsel and Deputy Commissioner of State GST, justified the delay by citing a notification dated April 24, 2023, which extended the time limit for the financial year 2017–18 to December 31, 2023. However, the petitioner argued that this notification could not revive a time limit that had already lapsed.
Legal Issues
1. Statutory Limitation under Section 73(10):
The court examined whether the orders were barred by the statutory limitation of three years for issuing tax assessments.
2. Retrospective Application of Notifications:
The validity and applicability of the April 24, 2023 notification were questioned, particularly in light of its retrospective effect from March 31, 2023, as specified in the notification itself.
3. Jurisdictional Validity of the Impugned Orders:
The core issue was whether the orders issued beyond February 5, 2023, could be sustained under the law.
Key Observations by the Court
In a detailed analysis, the court concluded that the notification dated April 24, 2023, could not retroactively validate actions beyond the statutory deadline that expired prior to March 31, 2023. The bench observed:
“If the time limit of three years prescribed in sub-Section 10 of Section 73 read with sub-Section 1 of Section 44 expired prior to March 31, 2023, then the notification dated April 24, 2023, extending the time limit would not be applicable.”
The court further stated that statutory limitations ensure predictability and fairness in tax administration and that notifications cannot override the express provisions of the law.
Court’s Decision
The High Court declared the orders dated October 5, 2024, and December 2, 2023, as void ab initio and without jurisdiction. Consequently, the court directed the de-freezing of the petitioner’s bank accounts, ordering:
“The impugned orders are beyond the time limit prescribed under Section 73(10) of the U.P.G.S.T. Act, 2017, as applicable for the financial year 2017–18, and therefore, they are beyond jurisdiction.”
