Facts of the Case

M/s Harbir Singh Contractor (petitioner no.1), previously registered under the Finance Act, 1994 for "Manpower Supply Services", was auto-migrated under the Central Goods and Services Tax Act, 2017 by operation of Section 139. While filling the original FORM GST REG-01, he was granted registration primarily as an Input Service Distributor (ISD), even though the record also disclosed his business as "Manpower Recruitment Agency". Contrary to law, the GSTN portal permitted this ISD registration to issue tax invoices and accept a tax deposit of Rs. 1,44,97,066. Unable to file GSTR-3B (which an ISD cannot file), the petitioner obtained a fresh, proper registration on 23.10.2017 for the same activity, while the department itself issued a notice dated 18.11.2019 seeking to cancel the original registration for non-filing of GSTR-3B — treating the petitioner as a regular taxable person. The refund of tax deposited under the original/ISD registration was sanctioned in appeal, paid on 1.5.2019, and redeposited against the new registration on 6.5.2019. Petitioner no.2, M/s Vivo Mobile India Private Limited, was denied Input Tax Credit on revised tax invoices issued by petitioner no.1 by an Authority for Advance Ruling order dated 17.12.2019. The petitioners sought a direction treating the new registration as effective retrospectively from 1.7.2017 and setting aside the AAR's refusal of ITC.

Issues Involved

  1. Whether the new GST registration granted on 23.10.2017 could be treated as effective retrospectively from 1.7.2017.
  2. Whether errors in registration and tax deposit, attributable to the GSTN portal's design, entitled the petitioner to equitable relief absent an express statutory provision.
  3. Whether petitioner no.2 was entitled to Input Tax Credit on the revised tax invoices issued under the new registration.

Petitioner's Arguments

  • The original REG-01 form disclosed both the ISD activity and the actual business activity ("Manpower Recruitment Agency"), so the ISD-only classification was not solely the petitioner's error.
  • The GSTN portal itself allowed an ISD registration to issue tax invoices and accept tax deposits, which is legally impossible for an ISD, showing the error originated in the portal's design.
  • The department's own notice dated 18.11.2019, seeking cancellation for non-filing of GSTR-3B, proved the revenue itself treated the petitioner as a regular taxable person, not an ISD.
  • Since the software did not permit correction of the registration category, obtaining a fresh registration was the only recourse and it should relate back to 1.7.2017 in fairness.

Respondent's Arguments

  • The revenue disputed the extent of disclosure made in the original REG-01 form and attributed the error to the petitioner's own conduct.
  • Tax deposited under the ISD/original registration should not translate into retrospective benefit for a separately obtained new registration.

Court Order/Findings

  • The Court found the original registration form disclosed the business activity of "Manpower Recruitment Agency" alongside the ISD description, and the GSTN portal itself permitted this incongruous combination.
  • An ISD registration can never lawfully be used to issue tax invoices or accept tax deposits; the department's own conduct in issuing a GSTR-3B default notice against the ISD registration showed the mistake was compounded by both GSTN and the revenue.
  • The Court held that procedural law, including software-driven GST processes, is a handmaid of justice and must yield to substantive justice; the new registration was directed to be treated as effective retrospectively from 1.7.2017 on a deemed basis.
  • Consequential ITC benefit to petitioner no.2 was made conditional on verification that petitioner no.1 had duly deposited tax with its October 2017 return relevant to the revised tax invoices.
  • If software limitations prevent this, the jurisdictional Assistant Commissioner was directed to pass appropriate orders, preferably by 31.03.2024; a copy of the order was also directed to be sent to CBIC to address similar machine-error situations generally.

Important Clarification

  • Machine/portal-driven errors under GST do not defeat substantive relief where the taxpayer's conduct is bona fide and the registration/tax-deposit errors trace to GSTN's system design.
  • An ISD registration cannot, in law, be used to raise tax invoices or accept tax deposits; such usage is a legal anomaly requiring correction, not automatic forfeiture of the taxpayer's rights.
  • Retrospective/deemed effect of a corrected registration is available as an equitable remedy where the taxpayer had only one business vertical and no intent to misuse dual registrations.

Sections Involved

  • Section 22, CGST Act, 2017 – persons liable for registration.
  • Section 24, CGST Act, 2017 – compulsory registration in certain cases, including Input Service Distributors.
  • Section 25, CGST Act, 2017 – procedure for registration.
  • Section 39, CGST Act, 2017 – furnishing of returns, including the ISD return.
  • Section 46, CGST Act, 2017 – notice to return defaulters.
  • Section 139, CGST Act, 2017 – migration of existing taxpayers.
  • Rule 8, CGST Rules, 2017 – application for registration, including separate ISD registration.
  • Rule 65, CGST Rules, 2017 – form and manner of ISD returns (GSTR-6).

Decision – In Favour of

The decision substantially favours the assessee – the writ petition was allowed and the new registration was directed to be treated as retrospectively effective from 1.7.2017. However, the consequential ITC benefit to petitioner no.2 was made conditional on verification of tax deposit compliance, making it a qualified rather than unconditional win.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: WRIT TAX No. 454 of 2020
  • CNR: Not available
  • Coram: Hon'ble Saumitra Dayal Singh, J. and Hon'ble Surendra Singh-I, J.
  • Decision Date: 26.10.2023
  • Disposal Nature: Allowed (registration deemed effective retrospectively from 1.7.2017; ITC relief for petitioner no.2 subject to verification of tax deposit)

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