2024 (10) TMI 203 - HC - GST

Judicial Order Validates GST Registration Restoration Under Rule 86B, Prioritizing Business Continuity and Minimal Technical Noncompliance

HC ruled in favor of petitioner, directing restoration of GST registration after finding compliance with Rule 86B requirements. Despite respondents' ... Seeking to restore the GST registration of the Petitioner under the trade name of Shri Salasar Balaji Steel - direction to Respondent authorities to confirm compliance by the Petitioner of the Show Cause Notice and take all necessary steps to restore the Petitioner’s GST status without any further delay - non-compliance with Rule 86B of CGST Rules/DGST Rules - HELD THAT:- In terms of Rule 86B of the CGST Rules/the DGST Rules, a registered taxpayer cannot use input tax credit (ITC) available in the electronic credit ledger for discharge of its entire liability towards the outward supplies. The taxpayer’s utilisation of ITC for the aforesaid purpose is confined to a maximum of 99% of its liability towards output supply. Accordingly, the petitioner deposited a sum of ₹80,000/-. The petitioner contends that with the deposit of the said amount, it has satisfied the requirement of paying at least 1% of its liability on outward supplies. Insofar as the payment of 1% of liability on outward supplies is concerned, the petitioner would ensure that it deposits the amount under the relevant form or furnishes the necessary forms for duly recording the payment of tax against its liability within a period of two working days from date. Insofar as the allegation that the petitioner’s name is included in the list of fake firms is concerned, there is no allegation to the said effect in the SCN. Thus, clearly, the same cannot be a ground for continuing to suspend the petitioner’s GST registration. It is necessary to bear in mind that suspension of a taxpayer’s GST registration has wide adverse ramifications for the business of the taxpayer. Thus, such an action can be taken only after due consideration. Since, the only allegation in the SCN is that the petitioner has not complied with Rule 86B of the CGST Rules/DGST Rules, which in effect stands remedied by deposit of the amount of ₹80,000/- with the Revenue, it is considered apposite to allow the present petition and the respondents is directed to forthwith restore the petitioner’s GST registration. Petition disposed off. Issues:1. Petition for restoration of GST registration.2. Suspension of GST registration due to non-compliance with Rule 86B of CGST Rules/DGST Rules.3. Payment of 1% of liability on outward supplies.4. Allegation of petitioner's name being included in a list of fake firms.Analysis:The petitioner filed a petition seeking the restoration of their GST registration under the trade name 'Shri Salasar Balaji Steel.' The petitioner was registered under the CGST Act/DGST Act and was assigned GSTIN registration number 07AZTPG3566F1Z2. The issue arose when a Show Cause Notice (SCN) was issued proposing to cancel the petitioner's GST registration for violating Rule 86B of the CGST Rules/DGST Rules, which restricts the use of electronic credit ledger to discharge tax liability beyond 99% in certain cases.The petitioner responded to the SCN by depositing a sum of Rs. 80,000, claiming compliance with the requirement of paying at least 1% of its liability on outward supplies. The respondents argued that the amount was deposited through a challan and not the requisite form, FORM DRC-03. Additionally, they cited the petitioner's name being listed as a fake firm as a reason for not revoking the suspension of GST registration.The court emphasized the adverse impact of GST registration suspension on a taxpayer's business and noted that the only allegation in the SCN was non-compliance with Rule 86B, which was rectified by the petitioner's deposit. The court directed the respondents to restore the petitioner's GST registration promptly. However, it clarified that this order did not prevent the respondents from taking further action for statutory violations or recovery of dues in accordance with the law.In conclusion, the court disposed of the petition by ordering the restoration of the petitioner's GST registration while allowing for future statutory proceedings or actions by the respondents if necessary.