2023 (10) TMI 484 - HC - GST

GST Registration Restored: Pay in Installments Amid Exceptional Circumstances, Compliance Required Within a Week.

The HC directed the restoration of the petitioner's GST registration within a week, contingent upon the deposit of a specified amount. The remaining tax ... Maintainability of petition - availability of alternative remedy - Cancellation of GST registration of petitioner - HELD THAT:- Admittedly, it is not in dispute that the petitioner no.1 was registered under the GST Act and GSTIN No.09BZAPK7818J1Z0 was granted to it, but due to unavoidable circumstances, the mother and sister of petitioner no.2 expired after prolonged serious illness due to which, the petitioner no.2 not only suffered financially but also mentally, due to which, the petitioner no.2 could not deposit the tax as well as filed is returns consecutively for for more than six months. Further, the petitioners in para 13 themselves mentioned and shows their will to deposit the entire dues along with interest. In the case in hand, the petitioner, in a peculiar circumstances, the petitioner no.2 could not deposit the amount of tax but the petitioner no.2, as stated above, is ready and willing to deposit the amount of tax. The respondent no.2 is directed to restore the registration of petitioner no.1 forthwith within a period of one week from the date of production of certified copy of this order. The petitioner no.2 is directed to deposit a sum of Rs. 6,00,000/-, after restoration of registration within a week - petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether cancellation of GST registration under Section 29(2)(c) for failure to file returns for six consecutive months is sustainable where the registrant admits tax liability, alleges unavoidable personal calamities preventing filing, and expresses willingness to pay dues. 2. Whether the Court may exercise its jurisdiction under Article 226 to order restoration of GST registration and permit payment of admitted tax by instalments when departmental appellate or adjudicatory fora are non-functional or an alternative remedy exists. 3. The extent to which the Court should follow or depart from departmental limitations and precedents concerning grant of instalment facilities (including maximum instalments permitted by departmental circulars) when exercising equitable discretion to avert commercial death of a business. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of cancellation under Section 29(2)(c) where non-filing arose from exceptional personal circumstances and liability is admitted Legal framework: Section 29(2)(c) permits cancellation of registration where a taxable person fails to file returns for consecutive six months. The statutory scheme contemplates automatic cancellation for protracted non-compliance but does not preclude consideration of surrounding facts and bonafides when challenged judicially. Precedent treatment: The Court considered judgments that treated admission of tax liability and demonstrable financial/extraordinary hardship as factors weighing in favour of relief by restoration subject to conditions (see cited High Court decisions). Those authorities permitted belated return acceptance and instalment payment rather than strict enforcement of cancellation in cases of admitted liability and genuine hardship. Interpretation and reasoning: The Court found cancellation factually based on admitted non-filing. However, it emphasized the petitioner's uncontested explanation of exceptional personal calamities (deaths in family), mental and financial exhaustion, and an unequivocal willingness to discharge the tax liability with interest. Weighed collectively, those facts furnished a sufficient equitable basis to mitigate the sanction of cancellation and to justify conditional restoration. The Court balanced the statutory object of compliance with the substantive unfairness of depriving a business of registration where the tax is not disputed and payment can be structured. Ratio vs. Obiter: Ratio - where non-filing under Section 29(2)(c) is established but the registrant demonstrates bona fide exceptional circumstances and admits liability with willingness to pay, the Court may direct restoration subject to conditions (payment and instalments). Obiter - observations on the emotional state of the proprietor as a general mitigation principle beyond the facts of the case. Conclusions: Cancellation was not immune from equitable intervention. Restoration was appropriate on the facts because liability was admitted and the petitioner proposed to clear dues; the Court therefore directed conditional restoration rather than upholding cancellation absolutely. Issue 2: Jurisdiction of the Court to restore registration and allow instalments where departmental tribunals or appellate bodies are non-functional or an alternative remedy exists Legal framework: Article 226 confers power on High Courts to grant writs for enforcement of fundamental rights and for other purposes; judicial review can be exercised where statutory adjudicatory or appellate mechanisms are ineffective or non-functional. Departmental schemes and circulars provide internal mechanisms for instalment payments, and procedural remedies exist before departmental appellate fora. Precedent treatment: The Court relied on and followed high-court authorities which exercised judicial discretion to grant instalment relief and restoration where the taxpayer had no effective remedy in practice or where the strict departmental limits would lead to commercial collapse. Those authorities nonetheless recognized limits on judicial extension of administrative maxima absent departmental concurrence. Interpretation and reasoning: The Court accepted as fact that the GST Tribunal was not functional in the State at the relevant time, thereby creating an effective absence of an alternate efficacious remedy. In that context, judicial intervention under Article 226 was appropriate to prevent irreparable commercial prejudice. However, the Court acted cautiously and structured relief by restoring registration only upon advance part payment and by directing the departmental authority to compute and communicate remaining dues and instalment schedule, thereby preserving departmental role in assessment and collection while filling the remedial lacuna occasioned by non-functioning tribunals. Ratio vs. Obiter: Ratio - where departmental appellate or adjudicatory fora are non-functional, the High Court may entertain writs and, in appropriate cases of admitted liability and bona fide hardship, order restoration and structured payment. Obiter - guidance about the conditions under which Article 226 should be invoked generally (e.g., avoid substituting departmental policy without need). Conclusions: The Court lawfully entertained the writ due to the non-functionality of the tribunal and was justified in directing restoration and staged payment as a temporizing but effective remedy, while preserving departmental determination of outstanding amounts and oversight of instalment compliance. Issue 3: Scope of judicial power to prescribe instalment schemes vis-à-vis departmental maxima and safeguards against abuse Legal framework: Departmental circulars empower Commissioners/Chief Commissioners to permit payment of arrears in specified maximum monthly instalments (e.g., up to 24 or, with higher authority, up to 36). The statutory and administrative scheme aims to balance revenue protection with taxpayer rehabilitation; discretion is vested in executive authorities to fix instalments and conditions. Precedent treatment: The Court relied on authorities where High Courts either (a) directed acceptance of belated returns and instalments within or consistent with departmental maxima, or (b) where departmental authorities consented, permitted extension of instalments while imposing periodic review and revival of cancellation on default. Courts in those cases avoided unilaterally prescribing manifestly longer schedules against departmental policy unless the department agreed or exceptional circumstances warranted judicially-crafted conditional relief. Interpretation and reasoning: The Court acknowledged the departmental instalment regime but did not substitute its own revenue-assessment function. Instead it required an initial deposit (Rs.6,00,000 in the case) as a condition precedent to restoration, directed the department to compute remaining outstanding with interest, and ordered that the balance be paid in six equal monthly instalments. The Court imposed temporal and performance-based thresholds, thereby providing a concrete remedy while protecting revenue via upfront payment and limited instalment span, and retaining departmental involvement in quantification and monitoring. The Court also signalled that default would revive cancellation, mirroring safeguards in precedents. Ratio vs. Obiter: Ratio - courts may condition restoration on a combination of upfront payment and structured instalments, but should ordinarily leave assessment of outstanding dues and fixation of instalments to departmental authorities subject to judicially imposed temporal limits and review mechanisms. Obiter - endorsement of particular instalment durations as generally appropriate is fact-dependent and not a universal prescription. Conclusions: Judicially-ordered instalment relief is permissible but must be formulated to protect revenue (advance payment, department to compute balance, limited instalment period, consequences for default). The Court applied these principles by restoring registration upon immediate payment and directing departmental determination of balance payable in six monthly instalments, with the implicit proviso that default may revive cancellation.