Facts of the Case

The petitioner, Sakthivel, challenged the cancellation of his GST Registration Certificate. The registration was cancelled on the ground that the petitioner had failed to file monthly Goods and Services Tax returns continuously for a period of six months.

Consequently, the GST registration was cancelled with effect from 24.01.2022 under Section 29 of the Central Goods and Services Tax Act, 2017.

The petitioner approached the Madras High Court under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus to:

  • call for the records relating to Reference No.ZA3301220880341 dated 24.01.2022;
  • quash the cancellation order as illegal and arbitrary; and
  • direct the respondents to revoke the cancellation of GST Registration No.33DNKPS7509Q2Z2 within a stipulated period.

The petitioner explained that the proprietor had been severely affected by ill-health resulting from preliminary COVID-19 fever, had undergone medical treatment and was advised bed rest for several months. Due to these circumstances, the petitioner could not file an appeal against cancellation within the time prescribed under the Act.

Issues Involved

The principal issues before the High Court were:

  1. Whether the petitioner should be granted relief against cancellation of GST registration under Section 29 of the CGST Act for continuous non-filing of monthly returns for six months.
  2. Whether the petitioner’s explanation of ill-health associated with preliminary COVID-19 fever, medical treatment and prolonged bed rest justified extending relief despite failure to file the statutory appeal within time.
  3. Whether the benefit of the earlier decision in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others should be extended to the petitioner.
  4. Whether GST registration could be revived subject to filing pending returns and payment of tax, interest, fine, fee and other applicable amounts in accordance with the conditions prescribed in the Suguna Cutpiece decision.
  5. Whether unutilised or unclaimed Input Tax Credit could be used to discharge tax, interest, fine or fee payable for securing revival of the cancelled registration.
  6. Whether Input Tax Credit could be utilised without prior scrutiny and approval by the competent GST authority.

Petitioner’s Arguments

The petitioner submitted that the proprietor of the concern had been severely affected by ill-health resulting from preliminary COVID-19 fever.

It was argued that:

  • the proprietor had undergone medical treatment;
  • he had been on bed rest for several months;
  • because of these circumstances, the petitioner could not file an appeal within the statutory time limit against cancellation of registration;
  • the case was covered by the principles and directions issued by the Madras High Court in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others, W.P.Nos.25048, 25877, 12738 of 2021 etc. batch, decided on 31.01.2022.

The petitioner specifically relied upon paragraph 229 of the Suguna Cutpiece judgment, under which taxpayers whose GST registrations had been cancelled were granted an opportunity to regularise defaults subject to strict conditions concerning filing of returns, payment of tax, interest, fine and fee, and scrutiny of Input Tax Credit.

The petitioner further relied on subsequent decisions stated in the order to have consistently followed Suguna Cutpiece.

Respondents’ Arguments

The respondents were represented by the Standing Panel Counsel, assisted by Junior Standing Counsel.

The order does not record a separate detailed substantive argument advanced by the respondents opposing revival of the petitioner’s registration. Therefore, no additional contention should be attributed to the Revenue beyond what is expressly recorded in the judicial order.

However, while deciding the matter, the High Court specifically noted that:

  • the Court had consistently followed the directions issued in Tvl. Suguna Cutpiece;
  • the Revenue/Department had accepted that view;
  • such acceptance was evident from the fact that no appeal had been filed in any of the matters referred to by the Court.

This recorded position materially influenced the Court’s decision to follow the earlier precedent.

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 recorded that the Revenue/Department had accepted the said view, as evidenced by the fact that no appeal had been filed in the matters referred to in the order.

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

The writ petition was therefore ordered on the same terms contained in paragraph 229 of the Suguna Cutpiece decision.

No costs were awarded, and the connected miscellaneous petition was closed.

Conditions Applicable for Revival of GST Registration

By expressly ordering the writ petition on the same terms as paragraph 229 of Suguna Cutpiece, the High Court extended the following conditions to the petitioner:

  1. Returns for the period prior to cancellation: The petitioner must file returns for the period before cancellation, if not already filed, together with unpaid tax, interest for delayed payment, and applicable fine and fee for belated filing, within 45 days from receipt of the order, if not already paid.
  2. No adjustment from Input Tax Credit: Payment of tax, interest, fine, fee and related amounts shall not be made or adjusted from any Input Tax Credit lying unutilised or unclaimed.
  3. Restriction on unutilised Input Tax Credit: If any Input Tax Credit remains unutilised, it shall not be used until scrutinised and approved by the appropriate or competent departmental officer.
  4. Use of approved Input Tax Credit: Only Input Tax Credit approved after scrutiny may thereafter be utilised for discharge of future tax liability.
  5. Returns after cancellation: The petitioner must also pay GST and file returns for the period subsequent to cancellation by declaring the correct value of supplies, with GST payment to be made in cash.
  6. Scrutiny of subsequently earned Input Tax Credit: Any Input Tax Credit earned shall be allowed to be utilised only after scrutiny and approval by the respondents or other competent authority.
  7. Departmental restrictions: The respondents may impose appropriate restrictions or limitations to prevent undue passing of Input Tax Credit and to guard against bill trading or misuse of the benefit of the order.
  8. Revival of registration: Upon payment of tax and penalty and uploading of returns, the GST registration shall stand revived forthwith.
  9. GST portal facilitation: The respondents must take suitable steps by instructing GST Network, New Delhi, to make appropriate changes in the GST web portal architecture to enable filing of returns and payment of tax, penalty and fine.
  10. Time for departmental exercise: The required exercise must be carried out by the respondents within 30 days from receipt of the order.

These conditions are reproduced in substance from paragraph 229 of Suguna Cutpiece, as quoted and adopted in the present order. Pages 3 to 5 of the uploaded judgment contain the detailed conditions, while pages 6 and 7 record the Court’s decision to extend the same benefit to the petitioner.

Important Clarification

This judgment should not be reported as an unconditional restoration of cancelled GST registration.

The relief was expressly granted on the same terms as paragraph 229 of the Suguna Cutpiece judgment. Therefore, revival was linked with substantial compliance obligations, including:

  • filing pending returns;
  • payment of defaulted tax;
  • payment of applicable interest, fine and fee;
  • cash payment requirements;
  • restrictions on utilisation of unverified Input Tax Credit;
  • scrutiny and approval of Input Tax Credit by competent authorities;
  • filing returns for periods subsequent to cancellation;
  • possible restrictions to prevent undue passing of ITC and bill trading.

It is also important that the High Court did not separately adjudicate that illness automatically condones every statutory delay in filing an appeal. Rather, considering the established line of decisions following Suguna Cutpiece, the Court extended the same benefit to the petitioner.

Further, the order records that the Department had accepted the Suguna Cutpiece approach, as evident from the absence of appeals in the matters referred to by the Court.

Sections / Legal Provisions Involved

Section 29 of the Central Goods and Services Tax Act, 2017 – Relevant to cancellation or suspension of GST registration; the petitioner’s registration was cancelled for failure to file monthly returns continuously for six months.

Article 226 of the Constitution of India – Invoked for issuance of a writ of certiorarified mandamus against the cancellation order and for a direction to revoke cancellation of GST registration.

Link to download the order - https://mytaxexpert.co.in/uploads/1783332558_1132compressed.pdf

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