Facts of the Case

The petitioner challenged the order cancelling her GST Registration bearing GSTN No. 33AFQPK6897Q3Z6. The registration was cancelled with effect from 26 January 2021 on the ground that the petitioner had failed to file monthly GST returns continuously for a period of six months. The cancellation was made in view of Section 29 of the Central Goods and Services Tax Act, 2017.

The petitioner approached the Madras High Court seeking a Writ of Certiorarified Mandamus to call for the records relating to Reference No. ZA330121098126W dated 26 January 2021, quash the cancellation order as illegal and arbitrary, and direct the respondent to revoke the cancellation of the petitioner’s GST registration.

According to the petitioner, she was unaware that the GST registration had been cancelled. It was stated that she had been diagnosed with medical ailments relating to viral fever, had undergone treatment and remained on bed rest for several months.

During this period, the petitioner’s business was being carried on by the staff of the concern, while statutory compliances, including filing of GST returns, were being handled by a part-time accountant.

The petitioner stated that she became aware of the cancellation only after being informed by other-end taxpayers that her GST registration stood cancelled. Owing to these circumstances, she was also unable to file a statutory appeal against the cancellation within the prescribed time.

Issues Involved

  1. Whether GST registration cancelled for continuous non-filing of monthly returns for six months under Section 29 of the CGST Act, 2017 could be revived subject to compliance with conditions imposed by the High Court.
  2. Whether the petitioner, who claimed lack of awareness of the cancellation due to medical ailments and dependence on staff and a part-time accountant for statutory compliances, could be granted relief despite failure to file an appeal within the statutory period.
  3. Whether the principles and directions laid down 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 upon filing pending returns and payment of tax, interest, penalty, fine and fee in accordance with the conditions prescribed in the earlier binding line of decisions followed by the Court.
  5. Whether unutilised or unclaimed Input Tax Credit could be used for payment of past tax defaults or subsequent GST liabilities before scrutiny and approval by the competent authority.

Petitioner’s Arguments

The petitioner submitted that the cancellation of GST registration had not come to her knowledge at the relevant time because she was suffering from medical ailments relating to viral fever, had undergone treatment and remained on bed rest for several months.

It was further submitted that:

  • the business operations were being carried on by the staff of the petitioner’s concern;
  • a part-time accountant was responsible for statutory compliances, including filing GST returns;
  • the petitioner became aware of the cancellation only when informed by other-end taxpayers;
  • because of these circumstances, the petitioner could not file an appeal against the cancellation within the time prescribed under the GST law; and
  • identical relief had already been granted by the Madras High Court in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others, W.P. Nos. 25048, 25877, 12738 of 2021 etc. batch, decided on 31 January 2022.

The petitioner relied upon the consistent judicial approach subsequently followed in:

  • M/s Maaruthi Foundations Private Limited vs Deputy Commissioner (ST) (FAC), reported in 2022 (5) TMI 405;
  • J. Jayakrishnan vs Additional Chief Secretary/Commissioner of Commercial Taxes, Chennai, reported in 2022 (7) TMI 1226;
  • TVL. Jeyalakshmi Store represented by its Proprietor, Sivanu Pandian vs Commissioner of Commercial Taxes, reported in 2022 (7) TMI 1275; and
  • M/s Pearl and Company vs Commissioner of Commercial Taxes, W.P.(MD) No. 19127 of 2022.

Respondent’s Arguments / Departmental Position

The respondent was represented by Standing Counsel assisted by Junior Standing Counsel.

The judgment records that the Madras High Court had consistently followed the directions issued in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others in various subsequent matters.

Significantly, the Court observed that the Revenue/Department had accepted the said view, as evident from the fact that no appeal had been filed in any of the matters referred to by the Court.

In view of this consistent judicial position and the Department’s acceptance of the same, the Court considered it appropriate to follow the earlier order.

Court’s Order / Findings

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

The Court further recorded that the Revenue/Department had accepted the said view, as demonstrated by the fact that no appeal had been filed in the matters where similar relief had been granted.

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

The writ petition was therefore ordered on the same terms as those contained in paragraph 229 of the judgment in Tvl. Suguna Cutpiece.

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

Conditions Governing Revival of GST Registration

The relief was extended 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, where not already filed, together with unpaid tax, applicable interest and fine/fee for delayed filing, within the prescribed period of 45 days from receipt of the order, if not already paid.
  2. Tax, interest, fine, fee and other amounts relating to the defaulted period cannot be paid or adjusted out of unutilised or unclaimed Input Tax Credit lying with the petitioner.
  3. Any Input Tax Credit remaining unutilised cannot be utilised until scrutinised and approved by the appropriate or competent departmental officer.
  4. Only approved Input Tax Credit may subsequently be utilised for discharge of future tax liability under the applicable GST law and rules.
  5. GST returns for the period subsequent to cancellation must also be filed by declaring the correct value of supplies, and the corresponding GST payment must be made in cash.
  6. Input Tax Credit earned during the relevant period may be utilised only after scrutiny and approval by the respondent 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 Department must take suitable steps, including instructions to the GST Network, New Delhi, to make necessary changes in the GST portal architecture so that the petitioner can file returns and pay tax, penalty and fine.
  10. The required exercise must be carried out by the Department within the period prescribed in the precedent followed by the Court.

Important Clarification

The judgment does not grant an unconditional restoration of GST registration merely because the taxpayer cited medical difficulties or lack of knowledge of cancellation.

The relief is conditional and is expressly linked to compliance with the framework laid down in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others.

A particularly important clarification is that outstanding tax, interest, fine and fee for the defaulted period cannot be discharged by adjusting unutilised or unclaimed Input Tax Credit.

Further, Input Tax Credit cannot automatically be utilised merely because it appears in the taxpayer’s account. Such credit is subject to scrutiny and approval by the appropriate or competent GST authority.

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

The decision is therefore significant for taxpayers whose GST registrations were cancelled for non-filing of returns and who could not pursue statutory remedies within time, while simultaneously protecting the Revenue through mandatory tax compliance, cash payment requirements and scrutiny of Input Tax Credit.

Sections and Legal Provisions Involved

  • Section 29 of the Central Goods and Services Tax Act, 2017 – Cancellation of GST registration.
  • Article 226 of the Constitution of India – Writ jurisdiction of the High Court.
  • Statutory provisions governing filing of GST returns, payment of tax, interest, fine/fee and consequences arising from non-compliance.
  • Provisions concerning scrutiny, approval and utilisation of Input Tax Credit.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783504155_1531compressed.pdf

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