Delay in GST appeal condoned; retrospective cancellation of registration set aside due to COVID-19 and notice issues

HC held that retrospective cancellation of the petitioner's GST registration and rejection of its appeal on limitation grounds were unsustainable in the circumstances. The petitioner's explanation-that it was unaware of the SCN until its clients received notices and that non-filing of returns was attributable to the COVID-19 pandemic-was accepted as a reasonable cause for delayed appeal and non-compliance. HC set aside the impugned order rejecting the appeal as time-barred and permitted the petitioner to pursue the statutory appellate remedy on merits. The petition was accordingly disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, notwithstanding the statutory bar on condonation of delay by the appellate authority under the Goods and Services Tax regime, the Court in exercise of writ jurisdiction can permit the assessee to avail the appellate remedy by directing that the appeal be heard on merits.

1.2 Whether, in the peculiar facts involving non-filing of returns during the COVID-19 period, alleged non-receipt of the show cause notice for cancellation of registration, and cascading consequences of retrospective cancellation, the rejection of the appeal as time-barred ought to be set aside and the appeal restored for consideration on merits.

1.3 To what extent the principles laid down in earlier decisions regarding (i) the inability of the appellate authority to condone delay, (ii) the High Court's power to extend time for filing an appeal, and (iii) the requirement to consider consequences of retrospective cancellation of registration, govern the present case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Writ jurisdiction vis-à-vis statutory bar on condonation of delay by appellate authority

Interpretation and reasoning

2.1 The Court noticed that earlier precedent has clearly held that the appellate authority under the GST law cannot condone delay beyond the statutorily prescribed period, and this position was not disputed. The rationale in such precedent is that where the statute fixes an outer limit for filing an appeal, the authority exercising appellate powers is bound by that limit and lacks jurisdiction to extend it.

2.2 The Court, however, contrasted this with another decision where, in exercise of writ jurisdiction, the High Court had granted additional time to the assessee to file an appeal under Section 107 of the Central Goods and Services Tax Act, 2017, and had directed that such appeal, if filed within the extended period, should not be dismissed as barred by limitation and be decided on merits.

2.3 The Court further noted that the said order of the High Court had been considered and the approach effectively endorsed by the Supreme Court, which granted a further window to file the statutory appeal and indicated that the issue of delay should be considered keeping in view that the assessee had been bona fide pursuing remedies before the High Court and the Supreme Court.

2.4 On this basis, the Court distinguished between (i) the lack of power of the appellate authority itself to condone delay beyond the statutory limit, and (ii) the constitutional power of the High Court, in appropriate cases, to issue directions enabling the assessee to avail the appellate remedy and securing a decision on merits despite the statutory limitation.

Conclusions

2.5 The Court held that, although the appellate authority cannot condone delay beyond the statutory period, the High Court in writ jurisdiction can, in suitable and exceptional circumstances, direct that the appeal be entertained and decided on merits, thereby permitting the assessee to avail the appellate remedy despite the delay.

Issue 2 - Justification for setting aside rejection of appeal as time-barred and directing decision on merits

Interpretation and reasoning

2.6 The Court took note that the petitioner's GST registration had been cancelled retrospectively from 01 July 2017 on account of non-filing of returns for six months during the COVID-19 period, and that this cancellation had led to cascading consequences, including notices for reversal of input tax credit received by the petitioner's clients.

2.7 The petitioner's explanation for delay in filing the appeal against the cancellation order was that it had not become aware of the show cause notice until its clients received notices, and that the failure to file returns itself was attributable to the COVID-19 pandemic. The Court considered these explanations as forming part of the factual matrix requiring examination on merits.

2.8 The Court also took cognizance of earlier precedent which held that retrospective cancellation of GST registration may not be tenable if the authority does not consider the unintended consequences, such as denial of input tax credit to customers, thereby indicating that such matters involve substantive issues that ought to be examined on merits rather than being shut out at the threshold of limitation.

2.9 In light of the Supreme Court's treatment of a similar situation, where the assessee was allowed further time to pursue the statutory appeal due to its bona fide pursuit of remedies in higher courts, the Court considered it appropriate to adopt a similar approach in the present case, confining the relief to the peculiar facts.

Conclusions

2.10 The Court concluded that the petitioner had furnished a reasonable explanation for the delayed appeal, linked to non-receipt of the show cause notice and COVID-related difficulties, and that the substantive consequences of the retrospective cancellation warranted adjudication on merits.

2.11 The appellate order rejecting the appeal solely on the ground of limitation was set aside. The petitioner was permitted to avail the appellate remedy, with a direction that the appeal shall be heard on merits and shall not be treated as barred by limitation.

2.12 The Court directed that the petitioner be afforded a personal hearing by the appellate authority, and that a reasoned order be passed on the merits of the cancellation of registration, clarifying that these directions were issued having regard to the peculiar facts of the case.

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