Facts of the Case

The petitioner, Tvl. P. Sasivarnam Contractor, was a registered GST contractor whose GST registration was cancelled by the State Tax Officer through an order dated 21.01.2022 on the ground that GST returns had not been filed continuously for more than six months under Section 29(2)(c) of the Central Goods and Services Tax Act, 2017.

The petitioner submitted that due to the COVID-19 pandemic and the nationwide lockdown, his business had completely stopped. GST compliance had been entrusted to a private accountant, and since there was no business activity, he did not regularly communicate with the accountant. Consequently, the GST returns were not filed, resulting in issuance of a show cause notice and eventual cancellation of GST registration.

The petitioner later became aware of the cancellation only in August 2022, after accessing the GST portal through the accountant. Thereafter, pending GST returns up to October 2021 were filed as Nil Returns because there had been no business transactions. However, the GST portal did not permit revocation of cancellation as the statutory period of 90 days had already expired.

Issues Involved

  1. Whether cancellation of GST registration for continuous non-filing of returns during the COVID-19 period deserved interference by the High Court.
  2. Whether delay in filing an application for revocation could be condoned considering the Supreme Court's limitation extension during the pandemic.
  3. Whether a taxpayer should be permanently kept outside the GST regime merely because of delayed compliance.
  4. Whether the principles laid down in Tvl. Suguna Cutpiece v. Appellate Deputy Commissioner (ST) (GST) were applicable to the present case.

Petitioner’s Arguments

  • The business remained closed because of the COVID-19 pandemic and nationwide lockdown.
  • Returns could not be filed as GST compliance was managed by a private accountant who alone had access to the GST portal.
  • After learning about the cancellation, all pending returns were immediately filed as Nil Returns.
  • The limitation for seeking revocation should exclude the period from 15.03.2020 to 28.02.2022, in accordance with directions issued by the Commissioner of Commercial Taxes based on the Supreme Court's orders extending limitation during COVID-19.
  • The petitioner relied upon the Madras High Court decision in Tvl. Suguna Cutpiece, where similar delays had been condoned and GST registrations restored.

Respondent’s Arguments

The State contended that:

  • The petitioner had an effective statutory remedy by way of appeal before the Appellate Authority.
  • Instead of availing the appellate remedy, the petitioner directly approached the High Court under Article 226.
  • Therefore, the writ petition was liable to be dismissed.

Court Order / Findings

The Madras High Court observed that the petitioner's case was substantially similar to Tvl. Suguna Cutpiece, where the Court had already considered identical circumstances involving cancellation of GST registration during the COVID-19 period.

The Court held that:

  • Keeping genuine taxpayers permanently outside the GST framework does not benefit the revenue.
  • Revival of registration facilitates legitimate business activities and ensures future tax compliance.
  • The GST law is intended to facilitate compliance rather than permanently debar registered persons.
  • The petitioner deserved restoration of GST registration subject to strict safeguards.

Accordingly, the High Court quashed the cancellation order and allowed restoration of GST registration subject to several conditions, including:

  • Filing all pending returns.
  • Payment of tax, interest, late fee, penalty and other statutory dues.
  • Payment to be made in cash without adjustment through unverified Input Tax Credit.
  • Scrutiny of ITC before future utilization.
  • Filing of subsequent GST returns after restoration.
  • Revival of GST registration upon compliance with the prescribed conditions.
  • Necessary modifications in the GST portal by the authorities to enable filing of returns.

Important Clarification

  • Cancellation of GST registration due to non-filing of returns during the COVID-19 period is not necessarily irreversible.
  • High Courts may restore GST registration where sufficient cause is established and statutory dues are cleared.
  • The decision reiterates that the objective of GST legislation is to promote tax compliance rather than permanently exclude taxpayers from the GST system.
  • Relief may be granted even where statutory timelines for revocation have expired, depending upon the facts and judicial precedents.

Sections Involved

  • Section 29(2)(c) of the Central Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India

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