2025 (5) TMI 1975 - HC - GST

GST Registration Restored: Pandemic-Impacted Business Granted Conditional Reprieve to File Pending Returns and Clear Outstanding Dues

Samir Kumar Ghosh Versus The State of West Bengal & Ors.

HC allowed restoration of GST registration for petitioner who failed to file returns during COVID-19 pandemic. The court set aside cancellation order, ... Cancellation of the petitioner’s registration - failure to file returns for a continuous period of six months - HELD THAT:- Admittedly, the petitioner’s registration under the said Act had been cancelled on the ground of non-filing of returns. It is not the case of the respondents that the petitioner had been adapting dubious process to evade tax. Taking note of the fact that the suspension/revocation of license would be counterproductive and works against the interest of the revenue since, the petitioner in such a case would not be able to carry on his business in the sense that no invoice can be raised by the petitioner and ultimately would impact recovery of tax, the respondents should take a pragmatic view in the matter and permit the petitioner to carry on his business. Having regard to the direction issued by the Hon’ble Division Bench of this Court in the case of Subhankar Golder v. Assitant Commissioner of State Tax, Serampore Charge & Ors. [2024 (5) TMI 1262 - CALCUTTA HIGH COURT], it is proposed to set aside the order dated December 6, 2021, cancelling the registration of the petitioner under the said Act, subject to the condition that the petitioner files his returns for the entire period of default and pays requisite amount of tax, interest, fine and penalty, if not already paid. Petition disposed off. 1. ISSUES PRESENTED and CONSIDERED- Whether the cancellation of the petitioner's registration under the West Bengal Goods and Services Tax (WBGST) and Central Goods and Services Tax (CGST) Act, 2017, on the ground of non-filing of returns for a continuous period of six months, was justified.- Whether the petitioner's inability to file returns and pay GST dues due to the COVID-19 pandemic constitutes a valid ground for relief from cancellation.- Whether the respondents were justified in refusing to reinstate the petitioner's registration despite the petitioner's expressed willingness to comply with the statutory requirements by filing returns and paying tax, interest, penalty, and fine.- The applicability and effect of the Division Bench's precedent in Subhankar Golder v. Assistant Commissioner of State Tax regarding cancellation and restoration of GST registration.- The procedural and substantive fairness in the cancellation and potential restoration of GST registration under the said Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification for Cancellation of Registration on Ground of Non-Filing of ReturnsThe legal framework under the WBGST and CGST Act, 2017 mandates regular filing of returns by registered persons. Non-compliance for a continuous period of six months empowers the tax authorities to cancel the registration. The respondents issued a show-cause notice dated November 15, 2021, citing this statutory provision as the basis for cancellation.The Court acknowledged that the cancellation was effected strictly on the ground of non-filing of returns. Importantly, there was no allegation or evidence that the petitioner engaged in any fraudulent or dubious activities to evade tax. This distinction is critical because the Act contemplates cancellation both as a punitive and regulatory measure, but the absence of mala fide conduct weighs in favor of a more lenient approach.The Court's reasoning emphasized that while the statutory provision allows cancellation, the consequences of such cancellation may be counterproductive to revenue interests. Cancellation disables the petitioner from issuing invoices, thereby effectively halting business operations and impairing tax recovery. This pragmatic interpretation aligns with the principle that tax laws should be enforced in a manner that balances compliance with economic realities.Issue 2: Effect of COVID-19 Pandemic on Compliance and Relief from CancellationThe petitioner's representative submitted that the COVID-19 pandemic caused business reverses, resulting in failure to file returns and pay GST dues timely. The Court considered this circumstance as a significant mitigating factor, recognizing the pandemic's unprecedented impact on business operations globally.While the Act does not explicitly provide for pandemic-related relief, the Court adopted a purposive approach, taking judicial notice of the pandemic's effects. This approach is consistent with evolving jurisprudence that encourages flexible interpretation of tax statutes in extraordinary situations to avoid harsh outcomes.The petitioner's expressed willingness to restart business operations and comply with all statutory obligations, including payment of tax, interest, penalty, and fine, was a decisive factor. The Court found that such willingness should not be disregarded and that the authorities should facilitate compliance rather than impose irreversible sanctions.Issue 3: Respondents' Discretion and Restoration of RegistrationThe respondents contended that there was no procedural irregularity in cancelling the registration. However, the Court held that the respondents ought to adopt a pragmatic and facilitative stance, especially when the petitioner seeks compliance and revival of business activities.Relying on the Division Bench's decision in Subhankar Golder v. Assistant Commissioner of State Tax, the Court set aside the cancellation order dated December 6, 2021, subject to conditions. The precedent underscored that cancellation orders could be set aside if the defaulting party demonstrates bona fide intention to comply and rectifies the default within a stipulated timeframe.The Court directed restoration of registration upon the petitioner's compliance with filing all pending returns and payment of requisite amounts within four weeks. This conditional restoration balances the statutory mandate with equitable considerations, ensuring that compliance is enforced without permanently debilitating the petitioner's business.Issue 4: Procedural Directions and Portal ActivationTo operationalize compliance, the Court ordered the respondents to activate the relevant GST portal within one week to enable the petitioner to file returns and make payments. This direction ensures that the petitioner's right to compliance is practically achievable, reflecting the Court's concern for procedural fairness and administrative efficacy.The Court also noted that no affidavit-in-opposition was filed by the respondents, implying that the factual allegations in the writ petition were not contested. This absence of opposition further supported the Court's inclination to grant relief.3. SIGNIFICANT HOLDINGS- 'It is not the case of the respondents that the petitioner had been adapting dubious process to evade tax.' This observation underscores the absence of malafide intent or fraudulent conduct, which is crucial in deciding relief against cancellation.- The Court held that 'suspension/revocation of license would be counterproductive and works against the interest of the revenue since, the petitioner in such a case would not be able to carry on his business in the sense that no invoice can be raised by the petitioner and ultimately would impact recovery of tax.' This principle highlights the pragmatic approach towards tax enforcement.- The Court's reliance on the Division Bench's direction in Subhankar Golder v. Assistant Commissioner of State Tax establishes the precedent that cancellation orders can be set aside upon compliance within a reasonable timeframe, balancing statutory enforcement with equitable relief.- The final determination was that the order cancelling the petitioner's registration was set aside subject to the condition that the petitioner files all pending returns and pays the requisite tax, interest, penalty, and fine within four weeks, failing which the writ petition would stand dismissed automatically.- The respondents were directed to activate the GST portal within one week to facilitate compliance, ensuring procedural fairness and practical feasibility of the Court's order.