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Facts of the Case

M/s. Vemuri Kaveri Travels, a partnership firm engaged in passenger transport by bus, had its GST registration suo motu cancelled on 29.07.2020 for failure to file returns for a continuous period of six months, following a show-cause notice dated 19.03.2020 to which it had replied on 29.03.2020. The petitioner's appeal against the cancellation was rejected by the appellate authority on 26.08.2022, which found that the petitioner had continued business and utilised input tax credit during the period without filing returns or discharging tax liability, and treated the request for revocation as not genuine. The petitioner challenged both orders before the Telangana High Court.

Issues Involved

  1. Whether the appellate order affirming suo motu cancellation of GST registration for non-filing of returns adequately considered the petitioner's case for revocation.
  2. Whether, absent constitution of the GST Appellate Tribunal, the matter should be remanded for reconsideration rather than the petitioner being left without an effective remedy.

Petitioner's Arguments

  • The petitioner submitted that no GST Appellate Tribunal had been constituted under Section 112 of the CGST Act, so no further appellate remedy was available against the impugned appellate order.
  • It was implicitly argued, through the challenge itself, that cancellation of registration would adversely impact the petitioner's ability to carry on its transport business.

Respondent's Arguments

  • The appellate authority's order (under challenge) had found that the petitioner continued to conduct business and utilise input tax credit without filing returns or discharging tax liability during the relevant period, and accordingly treated the petitioner's revocation request as not genuine, upholding the cancellation.

Court Order / Findings

  • The Division Bench referred to and considered its own earlier order in Chenna Krishna Charvultr Karampudi v. Additional Commissioner (Appeals), involving a similar cancellation dispute.
  • The Court held it would be in the interest of justice to remand the matter to the original authority for reconsideration of the cancellation, given the adverse impact cancellation has on the petitioner's ability to carry on business.
  • Both the appellate order dated 26.08.2022 and the original cancellation order dated 29.07.2020 were set aside, and the matter remanded, with the petitioner directed to submit all statutorily due returns and be given a due opportunity of hearing before a fresh order is passed.

Important Clarification

  • Given the severe civil consequence of cancellation of GST registration on a taxpayer's ability to carry on business, courts remain inclined to remand such matters for reconsideration with a fresh hearing, rather than treating the cancellation as final merely because returns were not filed for a continuous period.
  • Such remand is typically conditioned on the taxpayer submitting all statutorily due returns, ensuring cancellation-for-default cases are resolved on a fuller, compliant record rather than a bare procedural default.

Sections Involved

  • Section 29(2), CGST Act, 2017 – permits cancellation of registration for continuous default in filing returns.
  • Section 107, CGST Act, 2017 – governs the first appeal against a cancellation order.
  • Section 112, CGST Act, 2017 – provides for a second appeal before the GST Appellate Tribunal, unavailable at the relevant time due to non-constitution.

Decision – In Favour of

The decision is in favour of the assessee. Both the cancellation order and the appellate order affirming it were set aside, with the matter remanded for reconsideration after affording a hearing, subject to the petitioner filing all due returns.

Case Details

Court: High Court for the State of Telangana
Case No.: Writ Petition No. 36174/2022
CNR / Citation: Not available in judgment text
Coram: Hon'ble the Chief Justice Ujjal Bhuyan and Hon'ble Sri Justice C.V. Bhaskar Reddy
Date of Order: 20 September 2022

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