Facts of the Case

  • The petitioner, M/s. Pearl and Co., was a registered GST dealer engaged in execution of works contracts.
  • The petitioner regularly purchased materials from registered and unregistered suppliers and had appointed a part-time accountant to file GST returns.
  • Due to serious health complications, including hernia surgery and prolonged bed rest, the petitioner could not properly monitor GST compliance.
  • Consequently, GST returns were not filed for the prescribed period.
  • A Show Cause Notice dated 05.01.2022 was issued proposing cancellation of GST registration.
  • As no reply was submitted within the prescribed time, the department cancelled the GST registration vide order dated 07.02.2022 under Section 29(2) of the Tamil Nadu GST Act.
  • The petitioner later attempted to seek revocation, but the application was rejected because it was filed beyond the statutory limitation period.
  • Aggrieved by the cancellation, the petitioner approached the Madras High Court seeking restoration of GST registration.

Issues Involved

  1. Whether GST registration cancelled due to continuous non-filing of returns can be restored after expiry of the statutory period for revocation.
  2. Whether the High Court can exercise jurisdiction under Article 226 to revive GST registration despite limitation.
  3. Whether restoration of registration would serve the interest of revenue and facilitate tax compliance.

Petitioner's Arguments

  • The petitioner submitted that the default occurred due to unavoidable medical circumstances and prolonged illness.
  • GST returns could not be filed because business activities were severely affected during treatment.
  • Cancellation of GST registration prevented the petitioner from carrying on business and availing Input Tax Credit.
  • The petitioner relied upon the proceedings issued by the Commissioner of Commercial Taxes following the Supreme Court's limitation extension during the COVID-19 period.
  • Reliance was also placed on the decision in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST) where similar delays had been condoned and GST registrations restored.
  • It was argued that restoration of registration would benefit the Government by enabling recovery of taxes instead of keeping the taxpayer outside the GST system.

Respondent's Arguments

  • The department submitted that the petitioner continuously failed to file GST returns.
  • Under Section 29(2) of the Tamil Nadu GST Act, registration is liable to be cancelled for continuous non-filing of returns.
  • A valid Show Cause Notice had already been issued.
  • Since no satisfactory reply was filed, cancellation was rightly ordered.
  • The petitioner also failed to file the revocation application within the statutory period prescribed under the GST law.
  • Therefore, the writ petition deserved dismissal.

Court Order / Findings

The Madras High Court allowed the writ petition and held that:

  • Revival of GST registration would not prejudice the department.
  • Instead, restoration would enable collection of taxes and improve GST compliance.
  • The Court followed the principles laid down in Tvl. Suguna Cutpiece vs Appellate Deputy Commissioner (ST) (GST).
  • Excluding genuine taxpayers permanently from the GST regime defeats the very objective of the GST framework.
  • Taxpayers should be allowed to regularize defaults by filing pending returns and making statutory payments.
  • The Court directed restoration of GST registration subject to compliance with various safeguards.

The Court further directed that the petitioner must:

  • File all pending GST returns.
  • Pay outstanding tax, interest, penalty and late fees.
  • Make such payments only in cash and not through unutilized Input Tax Credit.
  • Allow scrutiny of any pending Input Tax Credit before future utilization.
  • File returns even for the period after cancellation.
  • Comply with all conditions prescribed in the Suguna Cutpiece judgment.

Upon compliance with these conditions, the GST registration was directed to be revived.

Important Clarification

This judgment reiterates that:

  • Cancellation of GST registration is not intended to permanently eliminate genuine taxpayers from the GST regime.
  • Courts may exercise extraordinary jurisdiction under Article 226 where denial of restoration would adversely affect revenue collection.
  • Revival of GST registration remains subject to complete statutory compliance, including payment of taxes, interest, penalties and filing of pending returns.
  • The decision follows the principles laid down in Tvl. Suguna Cutpiece, which has become a significant precedent governing restoration of cancelled GST registrations.

Sections Involved

  • Article 226 of the Constitution of India
  • Section 29(2) of the Tamil Nadu Goods and Services Tax Act, 2017
  • Provisions relating to Cancellation of GST Registration
  • Provisions relating to Revocation of Cancellation of Registration
  • GST Return Filing Provisions
  • Input Tax Credit (ITC) Provisions

Link to Download the Order

 https://www.mytaxexpert.co.in/uploads/1785569940_2553compressed.pdf 

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