Facts of the Case

Mayflower Hotels and Resorts LLP was an assessee registered under the GST laws. The petitioner failed to submit GST returns for the period from the year 2018 up to the year 2021.

As a consequence of such non-filing, the Assistant Commissioner of State Tax, Guwahati, by order dated 07 December 2021, cancelled the petitioner’s GST registration.

Aggrieved by the cancellation order, the petitioner invoked Section 107 of the Assam Goods and Services Tax Act, 2017 and sought interference with the order cancelling its GST registration.

The Joint Commissioner of State Taxes (Appeals), Guwahati, by order dated 09 September 2022, rejected the appeal on the ground of limitation. The appellate authority noted that an appeal under Section 107 was required to be filed within three months from the date of the impugned order, whereas the petitioner had filed the appeal after a delay of more than nine months.

The matter was thereafter brought before the Gauhati High Court.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the rejection of the petitioner’s appeal under Section 107 of the AGST Act, 2017 on the ground of delay was sustainable.
  2. Whether cancellation of GST registration could prima facie be faulted when the petitioner had admittedly failed to furnish returns from 2018 up to 2021.
  3. Whether the petitioner could seek revocation of cancellation under Section 30 of the AGST Act, 2017 despite expiry of the prescribed period.
  4. Whether the petitioner’s pursuit of an appeal under Section 107, though not the appropriate remedy in the circumstances, could constitute a good cause for considering condonation of delay in seeking revocation.
  5. Whether the authorities should consider restoration or revocation of the cancelled GST registration where the assessee was willing to file all pending returns and pay the entire GST dues together with applicable interest and penalty.

Petitioner’s Arguments

The petitioner sought relief against the cancellation of its GST registration and the rejection of its appeal.

The petitioner placed before the Court its willingness to:

  • file returns for all the years for which returns had not been filed;
  • pay the necessary GST dues to the Department;
  • pay any interest that may be leviable; and
  • pay any penalty that may be leviable.

The petitioner also pointed out that Section 30 contemplated filing of a revocation application within thirty days from the date of service of the cancellation order and acknowledged that the said thirty-day period had already expired.

The petitioner’s position, in substance, was that it was willing to regularise the statutory defaults and discharge all consequential tax liabilities, including interest and penalties.

Respondents’ Arguments / Department’s Position

The appeal filed under Section 107 had been rejected by the Joint Commissioner of State Taxes (Appeals), Guwahati because it was filed after a delay of more than nine months.

Section 107(1) provides for filing an appeal within three months from the date of the impugned decision or order.

The Court also noted that Section 107(4) permits entertainment of an appeal where the appellate authority is satisfied that the appellant was prevented by sufficient cause from filing the appeal within time. However, the impugned appellate order dated 09 September 2022 did not reflect that any sufficient cause had been shown by the appellant requiring the appellate authority to entertain the appeal beyond the prescribed period.

Further, the petitioner had admittedly failed to file returns from 2018 up to 2021. The Court observed that this also meant that the required amount of GST had not been paid for the said period.

Court Order / Findings

The Gauhati High Court took note of Section 29 of the AGST Act, 2017 and observed that failure to furnish returns for three consecutive tax periods may constitute a good reason for cancellation of registration.

Accordingly, from that perspective, where the petitioner had not submitted returns for three consecutive tax periods, the action of the departmental authorities in cancelling the registration could not prima facie be faulted.

However, the Court also took note of Section 30 of the AGST Act, 2017, which provides for revocation of cancellation of registration.

A significant factor before the Court was the petitioner’s express statement that it was willing to file returns for all the years for which returns had not been filed and to pay the necessary GST dues to the Department, including any interest or penalty that might be leviable.

The Court held that where the assessee was willing to file the returns and pay all required dues, including interest and penalties, it would be appropriate for the respondent authorities to consider any such proposal made by the petitioner and to give reasoned consideration to the claim for revocation of cancellation of registration.

The Court further considered the fact that the prescribed thirty-day period for a revocation application under Section 30 had expired.

Nevertheless, the Court observed that, in circumstances where the petitioner was willing to file returns and pay all tax dues, interest and penalties, the petitioner might have invoked the wrong provision by filing an appeal under Section 107 of the AGST Act, 2017.

The Court found it relevant that the petitioner had acted diligently in seeking to avail a remedy under the law, although that remedy might not have been the appropriate remedy in the circumstances.

On that basis, the Court held that this would be a good cause for the respondents to consider whether the delay in making the revocation application could suitably be condoned.

Important Clarification

The judgment should not be understood as laying down that every delayed application for revocation of GST registration cancellation must automatically be allowed.

The Court did not hold that the original cancellation was inherently invalid. On the contrary, it specifically observed that where returns had not been submitted for three consecutive tax periods, cancellation of registration could not prima facie be faulted in view of Section 29.

The material distinction in the present case was that:

  • the assessee expressed willingness to file all pending returns;
  • the assessee expressed willingness to pay all outstanding GST dues;
  • the assessee was willing to pay applicable interest and penalties;
  • the assessee had pursued a remedy under Section 107, although that remedy might not have been appropriate in the circumstances; and
  • such conduct was considered relevant for examining whether there was good cause to consider condonation of delay in making the revocation application.

Therefore, the High Court directed consideration of the petitioner’s proposal and claim for revocation; it did not itself grant unconditional or automatic restoration of GST registration.

Sections Involved

Section 29 of the AGST Act, 2017 — Cancellation or Suspension of Registration

The Court considered Section 29 in the context of the petitioner’s admitted failure to furnish returns. It observed that failure to furnish returns for three consecutive tax periods may provide a good reason for cancellation of registration.

Section 30 of the AGST Act, 2017 — Revocation of Cancellation of Registration

Section 30 was central to the relief contemplated by the Court. Although the prescribed period for seeking revocation had expired, the Court considered the petitioner’s willingness to file pending returns and pay tax, interest and penalties, along with its earlier pursuit of a remedy under Section 107, as relevant circumstances for the authorities to examine whether the delay could suitably be condoned.

Section 107(1) of the AGST Act, 2017 — Appeal to Appellate Authority

The petitioner’s appeal had been rejected because Section 107(1) prescribed a period of three months from the date of the impugned decision or order, whereas the appeal had been filed after a delay exceeding nine months.

Section 107(4) of the AGST Act, 2017 — Delayed Appeal on Sufficient Cause

The Court noted the provision permitting consideration where the appellate authority is satisfied that sufficient cause prevented timely filing. However, the impugned appellate order did not reflect that sufficient cause had been shown requiring entertainment of the appeal beyond the prescribed period.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783492610_1395compressed.pdf

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