GST audit notice valid even after registration cancellation under Section 29(3) and Section 65(1)

The Rajasthan HC dismissed a petition challenging an audit notice issued after GST registration cancellation. The petitioner argued that authorities could only audit registered persons, but the court held that Section 29(3) of the CGST Act mandates that cancellation does not affect liability to pay tax or discharge obligations. Section 65(1) authorizes audit of any registered person for the relevant period. Since the petitioner was registered during the audited period and fraudulently availed input tax credit before applying for cancellation, the audit proceedings were valid. The petition was dismissed with costs of Rs. 25,000.

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Issues:
Petitioner's claim for relief based on the legality of the audit notice and subsequent assessment order under the CGST Act.

Analysis:
1. The petitioner filed a Civil Writ Petition seeking various reliefs, including quashing of the audit notice and assessment order, contending that as a canceled registered person, the audit proceedings were contrary to the CGST Act.

2. The petitioner argued that since the foundation of the proceedings was against the mandate of the CGST Act, any resulting assessment order should be quashed, emphasizing that the High Court can intervene in writ jurisdiction if proceedings are unlawful.

3. The petitioner relied on a judgment from the Madras High Court to support the argument that audits can only be conducted against registered persons, which was a crucial point in the case.

4. The respondents opposed the petition, citing Section 29(3) of the CGST Act, which states that cancellation of registration does not absolve a person from tax liabilities incurred before cancellation, thus justifying the audit even after registration cancellation.

5. It was argued that a harmonious interpretation of Section 65 of the CGST Act allows audits for registered persons, and since the petitioner was registered during the relevant period, the audit and subsequent actions were lawful.

6. The Court examined Section 65(1) and Section 29(3) of the CGST Act, concluding that the audit of the petitioner, who was registered during the audit period, was valid, and the petitioner's attempt to benefit from writ jurisdiction due to registration cancellation after fraudulent activities was rejected.

7. The Court dismissed the writ petition, imposing a cost on the petitioner and directing the deposit of the specified amount with the Rajasthan High Court State Legal Services Authority, while also allowing the petitioner to pursue an appeal under the Act without affecting the appellate process.

8. The judgment clarified that any decision made by the Court would not impact the merits of the case before the Appellate Authority, ensuring a fair and separate consideration of the case in the appellate process.

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