Facts of the Case

The petitioner, Balaguru Kathiresan, challenged the order cancelling his GST registration bearing GSTN No. 33CVKPK3670H1ZH. The cancellation order was issued under Reference No. ZA330322026928M dated 07.03.2022.

The GST Registration Certificate of the petitioner was cancelled on the ground that the petitioner had failed to file Goods and Services Tax monthly returns for a continuous period of six months. Consequently, the registration was cancelled with effect from 07.03.2022 in view of Section 29 of the Central Goods and Services Tax Act.

The petitioner approached the Madras High Court under Article 226 of the Constitution of India seeking issuance of a Writ of Certiorarified Mandamus to quash the cancellation order as illegal and arbitrary and to direct the respondent to revoke the cancellation of the petitioner’s GST registration.

Issues Involved

The principal issues before the Court were:

  1. Whether the petitioner could be granted relief against cancellation of GST registration for failure to file monthly GST returns continuously for six months.
  2. Whether the petitioner could obtain revival of GST registration despite not filing an appeal against the cancellation order within the limitation period prescribed under the GST law.
  3. Whether the benefit of the directions previously issued by the Madras High Court in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others could be extended to the petitioner.
  4. Whether restoration of GST registration could be permitted subject to payment of outstanding tax, interest, fine and fee and filing of pending returns.
  5. Whether unutilised or unclaimed Input Tax Credit could be used for payment of tax, interest, fine or fee relating to the defaulted period without prior scrutiny and approval by the competent authority.

Petitioner’s Arguments

The petitioner submitted that he was unaware of the cancellation of his GST Registration Certificate.

It was explained that the petitioner’s wife had been diagnosed with viral fever, had undergone treatment and was advised bed rest. Due to these circumstances, the petitioner could not concentrate on his business affairs.

The petitioner further submitted that the business was being carried on by the staff of his concern and that only a part-time accountant was attending to statutory compliances, including the filing of GST returns.

According to the petitioner, he became aware of the cancellation of his GST registration only after being informed by other-end taxpayers that his GSTN registration stood cancelled.

Due to the circumstances explained above, the petitioner was unable to file an appeal against the cancellation of registration within the time stipulated under the Act.

The petitioner sought the benefit of the relief already granted by the Madras High Court in identical circumstances in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others, W.P. Nos. 25048, 25877, 12738 of 2021 and connected batch matters, decided on 31.01.2022.

Respondent’s Arguments

The learned Standing Counsel for the respondent submitted that it was not open to the appellate authority to pass orders disregarding the statutory limitations prescribed under the law.

It was therefore submitted that no fault could be found with the rejection of an appeal where the appeal had admittedly been filed beyond the prescribed limitation period.

At the same time, both the petitioner’s counsel and the respondent’s counsel referred to the earlier decision in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others, wherein directions had been issued for revival of cancelled GST registrations subject to specified conditions.

Court Order / Findings

The Madras High Court observed that, in identical circumstances, directions had already been issued in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others.

The Court further noted that the principles and directions in the Suguna Cutpiece case had thereafter been consistently followed in various decisions of the Court.

Considering the circumstances, the Court held that the benefit extended in the earlier orders, particularly in the Suguna Cutpiece case, could also be extended to the present petitioner.

Accordingly, the writ petition was ordered on the same terms mentioned in paragraph 229 of the order passed in the Suguna Cutpiece case.

The writ petition was accordingly ordered. No costs were imposed, and the connected miscellaneous petition was closed.

Conditions Governing Revival of GST Registration

The relief granted to the petitioner was made subject to the conditions laid down in paragraph 229 of the Suguna Cutpiece judgment, including the following:

  1. The petitioner is required to file returns for the period prior to cancellation of registration, if such returns have not already been filed, together with the defaulted tax remaining unpaid prior to cancellation, along with applicable interest, fine and fee for belated filing of returns, within forty-five days from receipt of a copy of the order, if not already paid.
  2. Payment of tax, interest, fine, fee and other amounts shall not be permitted to be made or adjusted from any Input Tax Credit lying unutilised or unclaimed in the hands of the petitioner.
  3. If any Input Tax Credit has remained unutilised, it shall not be utilised until it is scrutinised and approved by an appropriate or competent officer of the Department.
  4. Only approved Input Tax Credit shall thereafter be permitted to be utilised for discharge of future tax liability under the Act and Rules.
  5. The petitioner shall pay GST and file returns for the period subsequent to cancellation of registration by declaring the correct value of supplies, and payment of GST for such period shall also be made in cash.
  6. If any Input Tax Credit was earned, it shall be allowed to be utilised only after scrutiny and approval by the respondents or any other competent authority.
  7. The respondents may impose restrictions or limitations as warranted to ensure that there is no undue passing of Input Tax Credit pending such exercise and to prevent violation of law or any attempt at bill trading by taking advantage of the order.
  8. Upon payment of tax, penalty and uploading of returns, the registration shall stand revived forthwith.
  9. The respondents shall take suitable steps by instructing GST Network, New Delhi, to make appropriate changes in the architecture of the GST web portal to enable filing of returns and payment of tax, penalty and fine.
  10. The required exercise shall be carried out by the respondents within thirty days from receipt of a copy of the order.

Important Clarification

The judgment provides an important clarification concerning delayed challenges to GST registration cancellation orders.

The Court acknowledged the respondent’s submission that the appellate authority cannot disregard the statutory limitation prescribed under the GST law. Therefore, where an appeal is admittedly beyond limitation, rejection of such appeal cannot necessarily be faulted.

However, the High Court, exercising its writ jurisdiction under Article 226 of the Constitution of India, extended the benefit of its earlier ruling in the Suguna Cutpiece batch of cases to facilitate revival of GST registration subject to strict compliance conditions.

The judgment does not grant an unconditional restoration of registration. Revival is linked with compliance obligations, including filing of pending returns, payment of tax, interest, fine and fee, cash payment requirements for relevant liabilities, and restrictions on utilisation of Input Tax Credit until scrutiny and approval by the competent authority.

A particularly significant clarification is that unutilised or unclaimed Input Tax Credit cannot automatically be adjusted against tax, interest, fine or fee payable for the defaulted period. Such credit is subject to scrutiny and approval before utilisation.

The judgment further preserves the power of the Department to impose suitable restrictions or limitations to prevent undue passing of Input Tax Credit and to ensure that taxpayers do not misuse the relief for bill trading.

Sections Involved

Section 29 of the Central Goods and Services Tax Act, 2017

Section 29 deals with cancellation or suspension of GST registration. In the present case, the petitioner’s registration was cancelled after failure to file GST monthly returns continuously for six months, and the cancellation was stated to have been made in view of Section 29 of the CGST Act.

Article 226 of the Constitution of India

The petitioner invoked the writ jurisdiction of the Madras High Court under Article 226 of the Constitution of India and sought a Writ of Certiorarified Mandamus for quashing the cancellation order and directing revocation of cancellation of GST registration.

Link to download the order - https://mytaxexpert.co.in/uploads/1783155271_867compressed.pdf

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