2023 (1) TMI 1094 - HC - GST

Taxpayer Wins Challenge to GST Registration Cancellation, Granted Opportunity to Rectify Non-Compliance and Restore Registration Status

HC granted Writ Petition challenging GST registration cancellation due to non-filing of returns. Following precedent from previous case, Court allowed ... Cancellation of GST registration for continuous non-filing of returns - Revival of GST registration upon filing returns and payment of tax, interest, penalty and fees - Restriction on utilization of Input Tax Credit pending departmental scrutiny - Equitable relief by writ despite limitation in appeal where High Court precedent permits revival - Direction to respondents to enable GSTN portal changes to permit filing and paymentCancellation of GST registration for continuous non-filing of returns - Revival of GST registration upon filing returns and payment of tax, interest, penalty and fees - Petitioner entitled to revival of cancelled GST registration on compliance with conditions laid down in paragraph 229 of Suguna Cutpiece Centre's case. - HELD THAT: - The Court accepted that the petition challenges cancellation of registration effected under the Central Goods and Services Tax Act, 2017 for continuous non-filing of monthly returns. Noting that this High Court has consistently followed the directions in Tvl. Suguna Cutpiece Centre (reproduced in paragraph 229) and that the Revenue has not appealed those orders, the Court extended the same relief to the petitioner. The petitioner must file the returns for the period prior to cancellation (if not already filed), pay the tax outstanding along with interest and the prescribed fine/fee for belated filing within the stipulated period, and upon payment and uploading of returns the registration shall stand revived forthwith. The Court exercised its writ jurisdiction to grant equitable relief by following its established precedent notwithstanding that the appellate authority had rejected the earlier appeal as time barred. [Paras 1, 4, 5, 6]Writ petition allowed on the terms contained in paragraph 229 of the Suguna Cutpiece Centre order; registration to be revived on compliance; no costs.Restriction on utilization of Input Tax Credit pending departmental scrutiny - Revival of GST registration upon filing returns and payment of tax, interest, penalty and fees - Conditions regarding Input Tax Credit imposed as part of revival: unutilised ITC cannot be adjusted for payment, and any utilized ITC is subject to departmental scrutiny and approval before further utilization. - HELD THAT: - In adopting paragraph 229, the Court mandated that payment of tax, interest, fine/fee shall not be permitted to be adjusted from any unutilised or unclaimed Input Tax Credit. Where Input Tax Credit has been utilised, such utilization will remain subject to scrutiny and approval by an appropriate officer; only approved ITC may thereafter be utilised for future tax liabilities. These restrictions are directed to prevent undue passing of ITC or bill trading pending departmental verification. [Paras 3, 6]ITC utilisation to be restricted and subject to departmental scrutiny as per the terms adopted from paragraph 229.Direction to respondents to enable GSTN portal changes to permit filing and payment - Respondents directed to instruct GSTN to make necessary changes in the GST web portal to enable filing of returns and payment of tax/penalty/fine by petitioners within the time stipulated in the antecedent order. - HELD THAT: - The Court reproduced and adopted the procedural direction in paragraph 229 requiring the respondents to take steps, by instructing the GST Network, New Delhi, to modify the architecture of the GST web portal so that affected petitioners can file returns and pay tax/penalty/fine. The Court further stipulated a timeline for the respondents to carry out this exercise as laid down in the precedent order. [Paras 3, 6]Respondents to take steps to enable portal filing and payment within the period prescribed in the adopted order.Final Conclusion: Writ petition allowed on the terms contained in paragraph 229 of the Suguna Cutpiece Centre order; petitioner to file returns and pay tax, interest, fine and fees as directed, with prescribed restrictions on Input Tax Credit and portal facilitation by respondents; no costs. Issues:Challenge to the cancellation of Registration Certificate due to failure to file GST returns for six months. Appeal rejected on the ground of limitation. Application of directions issued in previous cases to the current situation.Analysis:The Writ Petition challenges the cancellation of the Registration Certificate based on the Petitioner's failure to file Goods and Services Tax monthly returns for six consecutive months, leading to the cancellation under Section 29 of the Central Goods and Services Tax Act, 2017. The Petitioner, represented by counsel, argued that the cancellation was unknown due to the Proprietor's medical condition, which necessitated treatment and bed rest, leaving only a part-time Accountant responsible for statutory compliances. Upon learning of the cancellation from other taxpayers, the Petitioner appealed, but it was rejected as being beyond the limitation period.Both the Petitioner and Respondents acknowledged a previous case where the Court issued specific directions in similar circumstances. The Court's directions in the case of Tvl.Suguna Cutpiece set conditions for petitioners to rectify the situation by filing returns, paying defaulted taxes with interest, and complying with fines and fees within a specified timeframe. The Court also emphasized restrictions on utilizing Input Tax Credit and the need for scrutiny and approval before its utilization. Additionally, the Court mandated the payment of GST in cash for subsequent periods post-cancellation.Given the consistent application of the directions from the Tvl.Suguna Cutpiece case in subsequent decisions, the Court decided to extend the same benefit to the current Petitioner. The Court highlighted that since the Revenue Department did not appeal these directions in other cases, it intends to follow the established precedent. Consequently, the Court ruled in favor of the Petitioner, ordering the Writ Petition to be granted on the same terms as outlined in the Tvl.Suguna Cutpiece case, without imposing any costs. The connected Miscellaneous Petitions were also closed in line with this decision.