Telangana HC grants relief in GST registration cancellation case citing COVID-19 pandemic impact on businesses

Telangana HC allowed writ petition challenging GST registration cancellation. Registration was cancelled for failure to file returns for six months continuously. Court considered COVID-19 pandemic's impact on businesses since March 2020, noting commercial establishments were closed or affected. HC directed petitioner to appear before authorities by specific date and file all pending GST returns with applicable late fees and penalties. Upon compliance, authorities must restore GST registration without further scrutiny regarding past defaults. Court treated this as one-time relief measure considering pandemic circumstances.

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Issues:
The challenge in the present Writ Petition is to the order dated 18.04.2023 passed by respondent No. 3/The Deputy State Tax Officer cancelling the GST registration of the petitioner due to failure to file returns for more than six months continuously.

Details:
The petitioner, a Public Sector Unit jointly promoted by various entities, provides technical consultancy services and implements welfare programs. The petitioner, registered under GST, faced challenges in filing returns due to the Covid pandemic, attrition of employees, and change of management. Adhoc amounts were paid towards CGST/SGST for different financial years.

The petitioner, upon receiving a show cause notice on 14.01.2023, replied promptly. However, the registration was cancelled without further inquiry or opportunity for a hearing. The petitioner expressed readiness to rectify the default, pay fines, and penalties to avoid irreparable loss.

The Standing Counsel for Commercial Taxes argued that the cancellation was justified as the petitioner failed to furnish returns for over six months despite the show cause notice. The cancellation was deemed necessary due to non-compliance.

Considering the impact of the Covid pandemic on businesses, the court referred to a Delhi High Court decision emphasizing cautious exercise of cancellation of GST registration. A Madras High Court decision outlined conditions for restoration of registration in similar cases, emphasizing the need for scrutiny and approval of tax payments and credit utilization.

In light of the judicial precedents and the petitioner's willingness to rectify the default, the court allowed the Writ Petition. The petitioner was directed to file all pending GST returns with late fees and penalties by a specified date. Upon compliance, the GST registration would be restored without further scrutiny, as a one-time measure.

The Writ Petition was allowed with no costs, and any pending miscellaneous petitions were closed accordingly.

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