GST Registration should not be cancelled on the bald ground that taxpayer has failed to reply to show cause notice.

Petitioner's GST registration to be restored with a condition that outstanding tax & interest shall be paid by him in cash and further ITC can be utilised only after scrutiny by department: High Court

Petitioner:

Petitioner's GST registration was cancelled by the first respondent on the ground that the petitioner has failed to file returns continuously for a period of six months.

It is case of the petitioner that the petitioner has been issued with a Show Cause Notice for replying as to why the GST registration of the petitioner as the petitioner has failed to file returns for above six months. 

The petitioner was unable to give reply to the said Show Cause Notice at that time.

It is submitted that even though the petitioner has not replied to the said Show Cause Notice, the first respondent ought to have given justiciable reason for cancelling the GST registration of the petitioner. Per contra, the first respondent has cancelled the GST registration of the petitioner vide impugned order on the bald ground that the petitioner has not responded to the said Show Cause Notice.

Revenue:

Opposing the prayer of the petitioner in this Writ Petition, the learned Government Advocate for the respondents submits that the petitioner has not filed returns for above six months.

Held:

The issue that arises for consideration in this Writ Petition was detailed considered by this Court in the case Tvl. Suguna Cutpiece Center Vs. The Appellate Deputy Commissioner, wherein, considering the revenue of the Government, certain reliefs were granted to the petitioners therein. The operative portion of the order reads as under:-

Since, no useful will be served by not allowing persons like the petitioners to revive their registration and integrate them back into the main stream, I am of the view that the impugned orders are liable to be quashed and with few safeguards.

There are adequate safeguards under the GST enactments which can also be pressed against these petitioners even if their registration are revived so that, there is no abuse by these petitioners and there is enough deterrence against default in either paying tax or in complying with the procedures of filing returns.

Further, the Government requires tax to meet its expenditure. By not bringing these petitioners within the GST fold, unintended privilege may be conferred on these petitioners unfairly to not to pay GST should they end supplying goods and/or services without registration. For example, a person renting out an immoveable property will continue to supply such service irrespective of registration or not.

Therefore, if such a person is not allowed to revive the registration, the GST will not be paid, unless of course, the recipient is liable to pay tax on reverse charge basis. Otherwise, also there will be no payment of value added tax. The ultimate goal under the GST regime will stand defeated. Therefore, these petitioners deserve a right to come back into the GST fold and carry on their trade and business in a legitimate manner.

The provisions of the GST Enactments and the Rules made there under read with various clarifications issued by the Central Government pursuant to the decision of the GST Council and the Notification issued thereunder the respective enactments also make it clear, intention is to only facilitate and not to debar and de-recognised assesses from coming back into the GST fold.

Writ Petitions are allowed subject to the following conditions:-

i. The petitioners are directed to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid.

ii. It is made clear that such payment of Tax, Interest, fine / fee and etc. shall not be allowed to be made or adjusted from and out of any Input Tax Credit which may be lying unutilized or unclaimed in the hands of these petitioners.

iii. If any Input Tax Credit has remained utilized, it shall not be utilised until it is scrutinized and approved by an appropriate or a competent officer of the Department.

iv. Only such approved Input Tax Credit shall be allowed for being utilized thereafter for discharging future tax liability under the Act and Rule.

v. The petitioners shall also pay GST and file the returns for the period subsequent to the cancellation of the registration by declaring the correct value of supplies and payment of GST shall also be in cash.

vi. If any Input Tax Credit was earned, it shall be allowed to be utilised only after scrutinising and approving by the respondents or any other competent authority.

vii. The respondents may also impose such restrictions / limitation on petitioners as may be warranted to ensure that there is no undue passing of Input Tax Credit pending such exercise and to ensure that there is no violation or an attempt to do bill trading by taking advantage of this order.

viii. On payment of tax, penalty and uploading of returns, the registration shall stand revived forthwith.

ix. The respondents shall take suitable steps by instructing GST Network, New Delhi to make suitable changes in the architecture of the GST Web portal to allow these petitioners to file their returns and to pay the tax/penalty/fine. x. The above exercise shall be carried out by the respondents within a period of thirty (30) days from the date of receipt of a copy of this order.

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