Facts of the Case

The Petitioner, Subramaniam Rajesh, Proprietor of M/s Aamutham Enterprises, was registered under the Goods and Services Tax law.

The Petitioner’s GST registration was cancelled by the second Respondent with effect from 09.09.2021 on the ground that the Petitioner had failed to file GST monthly returns for a continuous period of six months. The cancellation was made in view of Section 29 of the Central Goods and Services Tax Act, 2017.

According to the Petitioner, due to the COVID-19 pandemic, there were no business transactions, and consequently, the GST returns could not be furnished for more than six months.

Aggrieved by the cancellation order dated 09.09.2021, the Petitioner preferred an appeal before the appellate authority. However, the appellate authority rejected the appeal by order dated 08.09.2022 on the ground that the appeal had been filed beyond the prescribed period of limitation.

The Petitioner thereafter approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India, challenging both the GST registration cancellation order and the appellate order rejecting the appeal on limitation.

Issues Involved

  1. Whether the cancellation of the Petitioner’s GST registration for failure to file monthly returns continuously for six months should be allowed to continue when the default was attributed to the COVID-19 pandemic and absence of business transactions.
  2. Whether relief could be granted to the Petitioner despite rejection of the statutory appeal on the ground of limitation.
  3. 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, should also be extended to the Petitioner.
  4. Whether GST registration could be revived subject to filing pending returns and payment of applicable tax, interest, fine, fee and other statutory dues.

Petitioner’s Arguments

The Petitioner submitted that the failure to furnish GST returns for more than six months occurred because of the COVID-19 pandemic.

It was contended that there were no business transactions during the relevant period and, therefore, the Petitioner could not furnish the required GST returns.

The Petitioner further submitted that the GST registration was cancelled by the second Respondent through the order dated 09.09.2021.

Against the cancellation order, the Petitioner preferred an appeal before the appellate authority, but the appeal was rejected by order dated 08.09.2022 solely on the ground that it was beyond the period of limitation.

The Petitioner relied upon the decision in Tvl. Suguna Cutpiece vs The Appellate Deputy Commissioner (ST) (GST) and Others, where the Madras High Court had granted conditional relief in similar circumstances.

The Petitioner sought extension of the same benefit, particularly because the directions in Suguna Cutpiece had subsequently been consistently followed by the Madras High Court in several cases.

Respondents’ Arguments / Department’s Position

The Respondents were represented by the learned Senior Standing Counsel, assisted by the learned Junior Standing Counsel.

The impugned cancellation proceeded on the basis that the Petitioner had failed to file GST monthly returns continuously for six months, resulting in cancellation of registration under Section 29 of the CGST Act, 2017.

The appellate authority had rejected the Petitioner’s appeal on the ground that it had been filed beyond the permissible period of limitation.

Importantly, while deciding the writ petition, the High Court observed that the Revenue/Department had accepted the view adopted in the Suguna Cutpiece line of cases, as was evident from the fact that no appeal had been filed in those matters.

Court’s Findings and Order

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

The Court further observed that the decision in Suguna Cutpiece had consistently been followed in various subsequent decisions, including:

1. M/s Maaruthi Foundations Private Limited vs Deputy Commissioner (ST) (FAC)

Reported in 2022 (5) TMI 405.

The Court referred to this decision as one of the cases consistently following the directions laid down in Suguna Cutpiece.

2. J. Jayakrishnan vs The Additional Chief Secretary/Commissioner of Commercial Taxes, Chennai

Reported in 2022 (7) TMI 1226.

This decision was also noted as part of the consistent judicial approach extending relief in GST registration cancellation matters.

3. TVL. Jeyalakshmi Store represented by its Proprietor, Sivanu Pandian vs Commissioner of Commercial Taxes

Reported in 2022 (7) TMI 1275.

The High Court referred to this judgment as another decision following the principles and directions laid down in Suguna Cutpiece.

4. M/s Pearl and Company vs The Commissioner of Commercial Taxes

W.P.(MD) No. 19127 of 2022.

This case was also specifically referred to by the Court as part of the consistent line of decisions following Suguna Cutpiece.

The High Court observed that it had been consistently following the directions issued in Suguna Cutpiece and that the Revenue/Department had accepted the said view, as evident from the fact that no appeal had been filed in any of those matters.

Accordingly, the Court held that the benefit extended in the earlier orders, particularly the Suguna Cutpiece case, should also be extended to the present Petitioner.

The writ petition was therefore ordered on the same terms mentioned in paragraph 229 of the Suguna Cutpiece judgment. 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 must file returns for the period prior to cancellation of registration, if not already filed, together with unpaid tax, applicable interest, fine and fee for delayed filing, within forty-five days from receipt of the order, if not already paid.
  2. Payment of tax, interest, fine, fee and other dues cannot be made or adjusted from unutilised or unclaimed Input Tax Credit lying with the Petitioner.
  3. If any Input Tax Credit remained unutilised, it cannot be utilised until scrutinised and approved by the appropriate or competent officer of the Department.
  4. Only approved Input Tax Credit may thereafter be utilised for discharging future tax liability under the Act and Rules.
  5. The Petitioner must also pay GST and file returns for the period subsequent to cancellation of registration by declaring the correct value of supplies, and such GST payment must be made in cash.
  6. Any Input Tax Credit earned may be utilised only after scrutiny and approval by the Respondents or another competent authority.
  7. The Department may impose appropriate restrictions or limitations to prevent undue passing of Input Tax Credit and to ensure that the benefit of the order is not misused for bill trading.
  8. Upon payment of tax and penalty and uploading of returns, the registration shall stand revived forthwith.
  9. The Respondents must take suitable steps by instructing GST Network, New Delhi, to make necessary changes in the architecture of the GST web portal so as to enable filing of returns and payment of tax, penalty and fine.
  10. The required exercise must be carried out by the Respondents within thirty days from receipt of the order.

Important Clarification

The judgment does not grant an unconditional restoration of GST registration.

The relief is conditional and is expressly linked to compliance with the directions laid down in paragraph 229 of the Suguna Cutpiece judgment. The taxpayer is required to regularise the return-filing defaults and discharge the applicable statutory liabilities in accordance with those conditions.

A particularly important clarification is that tax, interest, fine, fee and other dues for the defaulted period cannot be adjusted against unutilised or unclaimed Input Tax Credit. Further, Input Tax Credit can be utilised only after scrutiny and approval by the competent authority.

The Court also recognised the Department’s power to impose appropriate restrictions to prevent undue passing of Input Tax Credit and misuse through bill trading.

The judgment is significant because the statutory appeal had already been rejected as time-barred, yet the High Court extended relief by following its consistent approach in Suguna Cutpiece and related cases.

Section Involved

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

Section 29 of the CGST Act deals with cancellation or suspension of GST registration. In the present case, the registration was cancelled on the premise that the Petitioner had failed to furnish GST monthly returns continuously for six months.

Article 226 of the Constitution of India

The Petitioner invoked the writ jurisdiction of the High Court under Article 226 of the Constitution of India to challenge the GST registration cancellation order dated 09.09.2021 and the appellate order dated 08.09.2022 rejecting the appeal on limitation.

Link to download the order -https://mytaxexpert.co.in/uploads/1783501300_1523compressed.pdf

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