As the world grapples with the Covid-19 pandemic; different approaches of the judiciary to pending tax matters merit attention. In mid-March, both the Kerala and Allahabad High Courts proactively took note of the risk to lawyers, court staff and judges on account of increase in the number of petitions being filed daily and passed orders restricting the Centre and State Governments from initiating tax recovery proceedings or taking any coercive measures till April 6, 2020.[1] The Kerala High Court also held that the assessment proceedings required to be completed before March 31, 2020 could also be deferred subject to the order of the Court.

The Union of India immediately filed a Special Leave Petition before the Supreme Court pleading that the High Courts had exceeded their jurisdiction by passing such broad and omnibus directions deferring recovery proceedings by various Central and State tax authorities and had violated the doctrine of separation of powers. Additionally, it was also pleaded that the High Courts had failed to take into account the overwhelming consequences of its orders on the financial system and revenue collection as taxpayers who may have been in a position to pay taxes would also opt to defer compliances under the Goods and Service Tax (“GST”) legislations.

The Supreme Court considered the pleadings and stayed the orders passed by the Kerala and Allahabad High Courts.[2] The Supreme Court’s order also noted that the Government was conscious of the prevailing Covid-19 situation and would itself evolve a proper mechanism to assuage concerns and hardships of everyone.

A mere three days later, taking note of the escalating Covid -19 crisis, the Supreme Court in a suo moto petition[3] passed an order indefinitely extending the period of limitation for filing petitions, applications, suits, appeals and all other proceedings before the Courts/tribunals, irrespective of the limitation prescribed under the general law or special laws, whether condonable or not, from March 15, 2020, in order to safeguard the right to appeal of the taxpayers. However, the relief provided by the Supreme Court was limited to the extension of limitation for filing of appeals, petitions, applications, etc., as it failed to extend the limitation in relation to assessment proceedings initiated by the tax departments.

Thereafter, the Government announced measures on March 24, 2020 in line with the stand taken during the proceeding before the Supreme Court, inter alia including extension of time limit for all proceedings, appeals, replies to showcause notice, filing of GSTR-3B, etc. along with waiver/ reduction of interest, penalty and late fees for delayed payment of tax by assessees, etc. under the GST legislations and extension of time limit for filing of appeals, applications, etc. under Customs and allied laws, up to June 30, 2020.[4]

To cut a long story short, the Supreme Court and the Government eventually took measures similar to those contemplated by the High Courts of Kerala and Allahabad.

Additionally, the Supreme Court exercised its powers under Article 141 and Article 142 of the Constitution, that enables it to issue an order to do complete justice, until a provision in that behalf is made. It, therefore does beg the question, whether the Supreme Court should have acknowledged and supplemented the foresighted orders passed by the High Courts located in the original hotspots of the virus, instead of staying the operation of the orders and waiting for the Government to supplement its stance.

The initial announcements made by the Finance Minister suggested that the relief measures were limited to the GST and Customs legislations and raised questions regarding the other tax legislations. Nearly a week into the lockdown, the Government promogulated the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 providing relief under the Customs, Service Tax, Excise and GST legislations. The Supreme Court could have passed an all-encompassing order instead of restricting its order to the issue of limitation of filing appeals, petitions, etc. and could have easily avoided the confusion caused. Given the exceptional circumstances created by the pandemic, such an order may have been more in keeping with the requirements of justice.

The omission on part of the Supreme Court to extend limitation in relation to assessment proceedings, left it to the respective States to take action in relation to the Value Added Tax (“VAT”) laws. Unfortunately, some of the State Governments such as Maharashtra, Delhi, Kerala, etc. have not yet extended the period of limitation for completion of assessment under the VAT laws. Assessees continue to receive requests for documentation in relation to assessment proceedings and refund applications without any regard for the extension of limitation proposed to be provided. It is also quite likely that despite pursuing the matters during the lockdown, the States may still extend the timelines.

Conclusion

While the Government and the Courts in cohesion have eventually been efficacious in handling the situation and providing respite to taxpayers, the Supreme Court could have passed an exhaustive order and provided relief a little early. As it is famously said “a stich in time saves nine.”

[1] W.P(Civil) No.8231 of 2020 and W. P. (Civil) No.7014/2020

[2] Special Leave Petition (Civil) Diary No(s). 10669/2020

[3] Suo Moto W. P. (Civil) No(s). 3/2020

[4] Press Release dated March 24, 2020