Abdul Samad Mohamed Inayathullah vs. The Superintendent Of CGST And Excise

Facts

The petitioner, Abdul Samad Mohamed Inayathullah, proprietor of M/s. AI Kareem Exports, a vegetable exporter, had his GST registration cancelled by the respondent, the Superintendent of CGST and C.Exicse, vide an order dated 25.06.2020. The cancellation was due to non-filing of GST returns for six months. The petitioner stated that his part-time accountant was unable to file returns due to contracting COVID-19. An application for revocation of cancellation was also rejected on 20.11.2020. The petitioner argued that he could not file an appeal within the statutory period because the GST portal did not accept it, and his livelihood was affected by the cancellation. The respondent contended that the petitioner was given sufficient opportunity, including a show cause notice on 09.01.2020, and failed to respond within the stipulated time, and also failed to file an appeal within the limitation period.

Held

The Court held that the cancellation of GST registration, especially for small-scale entrepreneurs, amounts to a "capital punishment" that can ruin their business and livelihood. The Court noted that while the GST Act has specific limitation periods, these should not be used to divest a person of their rights, particularly when faced with extenuating circumstances like the COVID-19 pandemic and personal health issues, as observed in a Bombay High Court judgment. The Court found that the petitioner's right to carry on trade under Article 19(1)(g) and Article 21 of the Constitution of India would be affected. The Court also highlighted the disparity in treatment compared to income tax assessments where non-payment of advance tax attracts interest but not immediate cancellation. The Court directed that the registration be revived, subject to the petitioner paying GST and filing returns for the period subsequent to cancellation, and that any utilized Input Tax Credit be scrutinized and approved. The Court also suggested that the department consider issuing notices in regional languages and via SMS and post to assist less educated traders. The respondents were directed to take steps to allow petitioners to file returns and pay taxes/penalties within thirty days.

Key Issues

1. Whether the cancellation of the petitioner's GST registration, due to non-filing of returns during the COVID-19 pandemic and subsequent inability to file an appeal within the statutory period, is arbitrary and illegal, violating the petitioner's right to carry on trade and livelihood under Article 19(1)(g) and Article 21 of the Constitution of India? Petitioner's arguments: The petitioner contended that the non-filing of returns was due to his accountant contracting COVID-19, a force majeure event. He argued that the GST portal's inability to accept his appeal due to the expiry of the limitation period, coupled with the cancellation of his registration, severely impacted his livelihood. He relied on the principle that statutory provisions should not be interpreted to deny the right to trade and commerce, referencing the constitutional guarantees. Respondent's arguments: The respondent argued that the petitioner was provided with sufficient opportunities, including a show cause notice, and failed to respond. They further contended that the petitioner failed to file an appeal within the prescribed limitation period under Section 107(4) of the GST Act, and therefore, there was no reason to interfere with the impugned order.