Facts of the Case

The petitioner, Tvl. Velmani Crusher, was a registered person under the GST law. The petitioner failed to file GSTR-3B returns for a period of six months.

Consequently, the second respondent, namely the Assistant Commissioner (Circle), Theni-II (Andipatti), cancelled the petitioner’s GST registration by order dated 17.05.2022, with effect from 31.12.2021.

The petitioner approached the Madras High Court seeking quashing of the cancellation order and a consequential direction to the respondents to revoke the cancellation and restore the petitioner’s GST registration.

The petitioner explained that due to ill-health and severe financial crisis, there were no business transactions and, as a result, the GST returns could not be furnished for six months.

The petitioner further stated that no appeal could be filed before the appellate authority against the GST registration cancellation order.

Issues Involved

The principal issues before the Court were:

  1. Whether the petitioner, whose GST registration had been cancelled for failure to file GSTR-3B returns for six months, could be granted relief for revival/restoration of the cancelled registration.
  2. Whether the benefit of the directions issued in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others, W.P. Nos. 25048, 25877, 12738 of 2021 etc. batch, dated 31.01.2022, could be extended to the petitioner.
  3. Whether restoration of GST registration could be permitted subject to filing pending returns and payment of tax, interest, fine/fee and other statutory dues.
  4. Whether unutilised or unclaimed Input Tax Credit could be used for payment of tax, interest, fine or fee relating to the defaulted period.
  5. Whether Input Tax Credit could be utilised after restoration without scrutiny and approval by the competent GST authority.

Petitioner’s Arguments

The petitioner contended that:

  • The failure to furnish GSTR-3B returns for six months occurred because of ill-health and severe financial crisis.
  • There were no business transactions during the relevant period.
  • Due to these circumstances, the petitioner could not furnish the statutory GST returns.
  • The GST registration was thereafter cancelled by the second respondent through the order dated 17.05.2022.
  • The petitioner was unable to file an appeal before the appellate authority against the cancellation order.
  • In identical circumstances, the Madras High Court had already granted relief in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others.
  • The directions issued in the Suguna Cutpiece case had consistently been followed by the Court in subsequent decisions.

Accordingly, the petitioner sought the same benefit and requested restoration of the cancelled GST registration subject to compliance with the conditions already prescribed by the Court in similar matters.

Respondents’ Arguments / Revenue’s Position

The judgment records appearance on behalf of the respondents through the learned Additional Government Pleader.

The Court importantly observed that the Revenue/Department had accepted the view adopted in the earlier line of decisions, as was evident from the fact that no appeal had been filed in any of those matters.

The Court treated this circumstance as relevant while deciding to consistently follow the directions previously issued in the Suguna Cutpiece case.

Court Order / Findings

The Madras High Court observed that it had consistently followed the directions issued in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others.

The Court further noted that the Revenue/Department had accepted the said view, which was evident from the fact that no appeal had been filed in the matters referred to before the Court.

Accordingly, the Court held that the benefit extended in the earlier orders, particularly the Suguna Cutpiece decision, should also be extended to the petitioner.

The Writ Petition was therefore ordered on the same terms mentioned in paragraph 229 of the Suguna Cutpiece judgment.

No costs were awarded.

Detailed Conditions Governing Revival of GST Registration

The relief granted to the petitioner was governed by the conditions laid down in paragraph 229 of the Suguna Cutpiece decision, including the following:

  1. Filing of Returns for Pre-Cancellation Period:
    The petitioner must file returns for the period prior to cancellation of registration, wherever such returns have not already been filed.
  2. Payment of Defaulted Tax:
    The petitioner must pay the tax defaulted and remaining unpaid prior to cancellation.
  3. Payment of Interest:
    Interest applicable to the belated payment of tax must also be paid.
  4. Payment of Fine and Fee:
    Fine and fee fixed for belated filing of returns for the defaulted period must be discharged under the applicable statutory provisions.
  5. Compliance Period:
    The required compliance must be undertaken within the period prescribed under the directions adopted by the Court, namely 45 days from receipt of a copy of the order, where such amounts have not already been paid.
  6. No Adjustment from Input Tax Credit:
    Payment of tax, interest, fine/fee and related dues covered by the directions cannot be made or adjusted from any unutilised or unclaimed Input Tax Credit lying with the petitioner.
  7. Restriction on Utilisation of Input Tax Credit:
    Any Input Tax Credit remaining available cannot be utilised until it is scrutinised and approved by the appropriate or competent officer of the Department.
  8. Use of Approved Input Tax Credit:
    Only Input Tax Credit duly scrutinised and approved may thereafter be utilised for discharging future tax liability under the GST law.
  9. Post-Cancellation Returns:
    The petitioner must also file GST returns for the period subsequent to cancellation of registration.
  10. Correct Declaration of Supplies:
    Returns for the subsequent period must disclose the correct value of supplies.
  11. GST Payment in Cash for Post-Cancellation Period:
    GST payable for the period subsequent to cancellation must also be paid in cash in accordance with the directions adopted by the Court.
  12. Scrutiny of ITC Earned:
    Any Input Tax Credit earned can be utilised only after scrutiny and approval by the respondents or other competent authority.
  13. Power to Impose Restrictions:
    The respondents may impose suitable restrictions or limitations to ensure that there is no undue passing of Input Tax Credit pending scrutiny.
  14. Prevention of Bill Trading:
    The authorities may adopt safeguards to ensure that the benefit of restoration is not misused for bill trading.
  15. Revival of Registration:
    Upon payment of tax and penalty and uploading of returns in accordance with the Court’s directions, the registration shall stand revived forthwith.
  16. GST Portal Facilitation:
    The respondents were required, in terms of the directions adopted from Suguna Cutpiece, to take suitable steps by instructing the GST Network to make necessary changes in the GST portal architecture so as to enable filing of returns and payment of tax, penalty and fine.
  17. Departmental Compliance:
    The prescribed exercise was directed to be carried out within the period specified in the precedent followed by the Court.

Important Clarification

This judgment does not grant unconditional restoration of a cancelled GST registration.

The relief is conditional and linked to strict compliance with the terms adopted from the Suguna Cutpiece judgment. In particular:

  • Pending returns must be filed.
  • Defaulted tax must be paid.
  • Applicable interest must be paid.
  • Fine and fee for belated filing must be discharged.
  • Specified payments cannot be adjusted against unutilised or unclaimed ITC.
  • ITC utilisation remains subject to scrutiny and approval.
  • Returns for the post-cancellation period must also be filed.
  • Correct value of supplies must be disclosed.
  • GST for the relevant post-cancellation period must be paid in cash in terms of the directions followed by the Court.
  • Authorities remain empowered to impose restrictions to prevent undue passing of ITC or bill trading.

A significant aspect of the judgment is the Court’s observation that the Revenue/Department had accepted the earlier judicial view, as reflected by the absence of appeals in the matters cited before it.

Sections / Legal Provisions Involved

Article 226 of the Constitution of India

The writ petition was filed under Article 226 seeking issuance of a Writ of Certiorarified Mandamus to quash the GST registration cancellation order and direct restoration/revival of registration.

Section 29 of the CGST Act, 2017 / Corresponding TNGST Act Provisions

Relevant to cancellation of GST registration, including cancellation arising from statutory defaults such as continuous non-filing of returns, subject to the applicable legal framework.

Section 30 of the CGST Act, 2017 / Corresponding TNGST Act Provisions

Relevant to revocation of cancellation of GST registration and the statutory mechanism governing restoration of registration, subject to prescribed conditions and procedural requirements.

Section 39 of the CGST Act, 2017 / Corresponding TNGST Act Provisions

Relevant to furnishing periodic GST returns, including the return compliance underlying the dispute concerning non-filing of GSTR-3B.

Section 50 of the CGST Act, 2017 / Corresponding TNGST Act Provisions

Relevant to interest payable on delayed payment of tax, forming part of the compliance conditions adopted by the Court.

Section 47 of the CGST Act, 2017 / Corresponding TNGST Act Provisions

Relevant to late fee for delayed furnishing of returns, to the extent applicable to belated return filing.

Input Tax Credit Provisions under the CGST/TNGST Framework

Relevant because the Court-adopted conditions specifically restrict adjustment and utilisation of unutilised, unclaimed or earned ITC until scrutiny and approval by the competent authority.

Link to download the order -https://mytaxexpert.co.in/uploads/1783408506_1353compressed.pdf

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