Facts of the Case

Tvl. Muthu Enterprises filed a writ petition under Article 226 of the Constitution of India before the Madurai Bench of the Madras High Court seeking issuance of a Writ of Certiorarified Mandamus.

The petitioner sought:

  • calling for the records relating to the respondent’s proceedings bearing Reference No. ZA3303220254550 dated 7 March 2022;
  • quashing the said proceedings; and
  • directing the respondent to revoke the cancellation of the petitioner’s GST registration and restore the same.

The petitioner had not filed GSTR-3B returns from July 2021 onwards.

Consequently, the respondent cancelled the petitioner’s GST registration by order dated 7 March 2022, with effect from 28 February 2022.

According to the petitioner, the continuous failure to file GST monthly returns from July 2021 occurred because of:

  • health issues; and
  • family commitments.

Subsequently, the petitioner filed the monthly returns up to February 2022 belatedly on 22 July 2022.

The petitioner further contended that, because of the above circumstances, it was unable to file an appeal against cancellation of registration within the time stipulated under the Act.

The petitioner therefore approached the High Court seeking restoration/revival of its GST registration.

Issues Involved

The principal issues involved were:

  1. Whether the petitioner’s cancelled GST registration could be restored despite continuous non-filing of GSTR-3B returns from July 2021 onwards.
  2. Whether the petitioner could be granted relief when the statutory appeal against cancellation of registration had not been filed within the prescribed time.
  3. Whether the benefit of the directions issued in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others could be extended to the petitioner.
  4. Whether delayed filing of monthly returns up to February 2022 justified consideration of restoration of registration subject to payment of tax, interest, fine, fee and compliance with other conditions.
  5. Whether the consistent line of Madras High Court decisions following Suguna Cutpiece should govern the petitioner’s case.
  6. Whether the Department’s acceptance of the earlier judicial view, evidenced by non-filing of appeals in those matters, supported extension of the same benefit to the petitioner.
  7. What safeguards should apply to utilisation of Input Tax Credit where registration is revived after cancellation.

Petitioner’s Arguments

The petitioner submitted that:

  • GSTR-3B returns could not be filed continuously from July 2021 due to health issues and family commitments.
  • The default was subsequently addressed by belatedly filing the monthly returns up to February 2022 on 22 July 2022.
  • Because of the circumstances faced by the petitioner, an appeal against cancellation of registration could not be filed within the time stipulated under the Act.
  • In identical circumstances, the Madras High Court had already granted relief 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 paragraph 229 of the Suguna Cutpiece decision, which laid down detailed conditions for restoration/revival of cancelled GST registrations.
  • Since the Court had consistently followed Suguna Cutpiece in subsequent cases, the petitioner sought equivalent relief.

Respondent’s Arguments

The respondent was represented by the learned Additional Government Pleader.

However, the judgment does not separately record any detailed counter-arguments or distinct legal submissions made on behalf of the respondent.

Therefore, to preserve the exact substance of the judicial order, no additional or assumed arguments should be attributed to the respondent.

The Court nevertheless considered an important institutional circumstance: the Revenue/Department had accepted the view taken in the earlier cases, as evident from the fact that no appeal had been filed in those matters.

Court Order / Findings

The Madras High Court extended the benefit of the earlier Suguna Cutpiece ruling to Tvl. Muthu Enterprises and ordered the writ petition on the same terms contained in paragraph 229 of that decision.

1. Consistent Reliance on Suguna Cutpiece

The Court observed that it had been consistently following the directions issued in:

Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others

The Court therefore considered the petitioner’s case within the same established line of decisions.

2. Revenue/Department Had Accepted the Earlier View

A significant finding was that the Revenue/Department had accepted the view taken in the earlier cases.

The Court inferred this from the fact that no appeal had been filed in any of those matters.

This was expressly cited as a reason for following the earlier order.

3. Benefit of Earlier Orders Extended to the Petitioner

The Court held that the benefit extended in the earlier orders, particularly Suguna Cutpiece, could also be extended to Tvl. Muthu Enterprises.

4. Writ Petition Ordered on Same Terms as Paragraph 229 of Suguna Cutpiece

The Court ordered the writ petition on the same terms mentioned in paragraph 229 of the Suguna Cutpiece order.

Those conditions, as reproduced in the judgment, are materially significant.

Conditions for Revival / Restoration of GST Registration

The relief was governed by the following conditions:

  1. Returns for the period prior to cancellation:
    The petitioner must file returns for the period prior to cancellation, if not already filed, together with the defaulted tax that remained unpaid before cancellation, along with interest for belated payment and the applicable fine and fee for delayed filing, within the prescribed period stated in the precedent.
  2. No adjustment from unutilised or unclaimed ITC:
    Payment of tax, interest, fine, fee and related amounts cannot be made or adjusted out of Input Tax Credit lying unutilised or unclaimed in the petitioner’s hands.
  3. Unutilised ITC subject to scrutiny:
    Any Input Tax Credit remaining unutilised cannot be utilised until scrutinised and approved by the appropriate or competent Departmental officer.
  4. Only approved ITC may subsequently be used:
    Only Input Tax Credit approved after scrutiny may thereafter be utilised for discharge of future tax liability under the Act and Rules.
  5. Returns and GST for post-cancellation period:
    The petitioner must pay GST and file returns for the period subsequent to cancellation by declaring the correct value of supplies.
  6. Post-cancellation GST payment in cash:
    Payment of GST for the relevant subsequent period is required to be made in cash under the conditions reproduced from Suguna Cutpiece.
  7. ITC earned subject to approval:
    Any Input Tax Credit earned can be utilised only after scrutiny and approval by the respondents or other competent authority.
  8. Department may impose safeguards and restrictions:
    The respondents may impose appropriate restrictions or limitations to ensure:
    • no undue passing of Input Tax Credit;
    • prevention of misuse pending scrutiny; and
    • prevention of bill trading by taking advantage of the order.
  9. Revival on compliance:
    On payment of tax and penalty and uploading of returns, the registration shall stand revived forthwith, in accordance with the conditions reproduced from Suguna Cutpiece.
  10. GST Network changes:
    The respondents were directed in the precedent to take suitable steps by instructing GST Network, New Delhi, to make appropriate changes in the architecture of the GST web portal to enable filing of returns and payment of tax, penalty and fine.
  11. Time-bound exercise:
    The relevant exercise was directed to be completed within the period specified in the precedent.

Final Order

The Madras High Court held that the petitioner should receive the benefit of the earlier decisions consistently following Suguna Cutpiece.

Accordingly:

The writ petition was ordered on the same terms mentioned in paragraph 229 of Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) and Others.

No costs were awarded.

The connected miscellaneous petition was closed.

Important Clarification

This judgment is particularly important because the Court did not grant an unconditional restoration of GST registration.

The relief was expressly tied to the detailed conditions laid down in paragraph 229 of Suguna Cutpiece.

Therefore, the judgment clarifies that restoration/revival may require strict compliance concerning:

  • filing of pending returns;
  • payment of defaulted tax;
  • payment of applicable interest;
  • payment of fine and fee for delayed filing;
  • cash payment requirements for specified liabilities;
  • restriction on immediate utilisation of unverified ITC;
  • scrutiny and approval of ITC by the competent authority;
  • filing of returns for periods after cancellation;
  • correct declaration of value of supplies;
  • safeguards against undue passing of ITC; and
  • measures against bill trading or misuse of the relief.

A further important clarification is that the Court specifically relied on the fact that the Suguna Cutpiece directions had been consistently followed in various subsequent decisions and that the Revenue/Department had accepted that view, as evident from non-filing of appeals in those matters.

The order therefore reflects consistency in judicial treatment of similarly placed taxpayers while simultaneously preserving Revenue safeguards relating to tax payment and ITC scrutiny.

Sections  Involved

·         Article 226 of the Constitution of India

The writ petition was expressly filed under Article 226 of the Constitution of India seeking a Writ of Certiorarified Mandamus to quash the cancellation proceedings and direct revocation/restoration of GST registration.

·         GST Act – Cancellation and Revocation Context

The dispute arose from cancellation of GST registration following non-filing of GSTR-3B returns and the petitioner’s inability to file a timely appeal.

·         GSTR-3B Compliance

The factual default directly concerned continuous non-filing of GSTR-3B returns from July 2021 onwards.

The petitioner subsequently filed monthly returns up to February 2022 belatedly on 22 July 2022.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783492671_1464compressed.pdf

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