Facts of the Case

The petitioner, M/s. Sri Janani Packaging, was a registered GST dealer engaged in business under GST Registration No. 33CFWPK8802H1Z2. The petitioner regularly purchased materials from registered and unregistered dealers and conducted business activities under the GST regime.

The petitioner entrusted the filing of GST returns to a private accountant who had exclusive access to the GST portal. Due to serious health complications, including a uterus-related medical condition requiring surgery and prolonged bed rest, the petitioner was unable to provide the accountant with the necessary business details required for filing GST returns.

As a consequence, GST returns were not filed continuously for more than six months, resulting in automatic cancellation of the GST registration under Section 29(2) of the Tamil Nadu GST Act. The petitioner preferred an appeal before the Deputy Commissioner (ST), but the appeal was rejected solely on the ground that it had been filed beyond the prescribed limitation period.

Aggrieved by the cancellation and the dismissal of the appeal, the petitioner approached the Madras High Court seeking restoration of the GST registration, contending that the cancellation had brought the business to a complete halt.

Issues Involved

  1. Whether the GST registration cancelled under Section 29(2) of the Tamil Nadu GST Act for continuous non-filing of returns could be restored through writ jurisdiction.
  2. Whether delay in filing the appeal against cancellation could be condoned considering the extraordinary circumstances and Supreme Court directions regarding limitation.
  3. Whether restoration of GST registration would serve the interests of revenue despite prolonged default in filing GST returns.

Petitioner's Arguments

The petitioner submitted that:

  • The failure to file GST returns was neither intentional nor deliberate.
  • Due to severe medical illness and surgery, the petitioner remained bedridden for several months.
  • Since only the petitioner possessed knowledge of the business transactions, the accountant could not upload GST returns.
  • The appeal was dismissed merely on limitation without considering the genuine circumstances.
  • The Commissioner of Commercial Taxes had issued proceedings dated 07.04.2022 directing exclusion of the period from 15.03.2020 to 28.02.2022 for computation of limitation in view of the Supreme Court's orders.
  • Reliance was placed on Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST), wherein the Madras High Court had restored GST registrations in similar circumstances.
  • Restoration would benefit both the petitioner and the revenue by enabling future tax compliance and collection.

Respondents' Arguments

The Government Advocate contended that:

  • The petitioner failed to file GST returns continuously for more than six months.
  • Under Section 29(2) of the Tamil Nadu GST Act, cancellation of registration is a statutory consequence of continuous default.
  • Since the petitioner violated the statutory requirement, the cancellation was valid and no interference was warranted.

Accordingly, dismissal of the writ petition was sought.

Court Order / Findings

The Madras High Court allowed the writ petition and directed restoration of the GST registration subject to stringent safeguards.

The Court observed that:

  • Restoration of registration would not prejudice the Revenue.
  • On the contrary, bringing the taxpayer back into the GST system would enhance tax collection.
  • Keeping businesses permanently outside the GST framework defeats the objective of the GST legislation.
  • The judgment in Tvl. Suguna Cutpiece squarely covered the present case.
  • The GST enactments are intended to facilitate compliance rather than permanently exclude taxpayers from the GST regime.

The Court directed restoration subject to conditions including:

  • Filing all pending GST returns.
  • Payment of tax, interest, penalty, late fee and other statutory dues.
  • Payment to be made in cash without adjustment through unutilised Input Tax Credit.
  • Scrutiny and approval of Input Tax Credit before utilisation.
  • Filing returns for the post-cancellation period.
  • Immediate revival of GST registration after compliance.
  • Necessary technical modifications by GSTN to facilitate filing of pending returns.

The writ petition was accordingly allowed.

Important Clarification

This judgment reiterates that cancellation of GST registration for non-filing of returns is not necessarily irreversible.

Where genuine and exceptional circumstances exist, particularly where restoration promotes tax compliance and revenue collection, the High Court may exercise its extraordinary jurisdiction under Article 226 to revive GST registration, subject to strict statutory safeguards.

The decision also reinforces the principles laid down in Tvl. Suguna Cutpiece, making it a significant precedent for taxpayers seeking restoration of cancelled GST registrations due to procedural defaults.

Sections Involved

  • Section 29(2), Tamil Nadu Goods and Services Tax Act, 2017 – Cancellation of GST Registration for Continuous Non-Filing of Returns.
  • Article 226, Constitution of India – Writ Jurisdiction of High Courts.
  • Principles relating to exclusion of limitation period pursuant to the Supreme Court's COVID-19 limitation orders.

Link to Download the Order

 https://www.mytaxexpert.co.in/uploads/1785569916_2550compressed.pdf 

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