Manikanta Electronics Services Center vs. State Of Telangana

Facts

The petitioner, Manikanta Electronics Services Center, had its GST registration voluntarily cancelled on June 21, 2021, with a declared zero tax liability. The Assistant Commissioner (ST), Warangal Urban-II, issued an order on August 22, 2024, imposing tax liability, interest, and penalty for the period 2019-2020, three years after the registration cancellation. This order was based on a show cause notice dated May 28, 2024. The petitioner's subsequent application for rectification of this order, filed on November 26, 2025, was rejected. The petitioner contended that the impugned orders were violative of natural justice and statutory provisions. The petitioner also sought suspension of bank account attachment and stay of recovery proceedings.

Held

The Court held that the cancellation of GST registration does not absolve a taxpayer of any existing liability for periods prior to cancellation. The impugned order pertains to tax liability for 2019-2020 due to alleged failure to declare correct input/output taxes, necessitating a notice under Section 73 of the Act. The Court noted that a show cause notice, along with DRC-01, was served, and despite reminders and personal hearings, the petitioner did not file a reply. Consequently, the assessing authority proceeded to impose tax and penalty. The Court found no infirmity in the impugned order requiring interference for reconsideration. However, the Court granted the petitioner liberty to prefer an appeal within two weeks, subject to statutory pre-deposit, which the appellate authority would consider in accordance with law. The bank account attachment and recovery proceedings were implicitly not stayed as the petition was disposed of with liberty to appeal.

Key Issues

1. Whether the impugned order dated 22.08.2024, imposing tax liability, interest, and penalty for the period 2019-2020, is violative of the principles of natural justice and the provisions of the Central Goods and Services Tax Act, 2017 and Telangana Goods and Services Tax Act, 2017, especially considering the prior cancellation of GST registration on 21.06.2021. Petitioner's arguments: The petitioner argued that after voluntary cancellation of their GST registration with zero tax liability, there was no reason to continuously monitor the portal. They also contended that the order was passed after an unreasonable delay of three years post-cancellation and that they were not properly heard, despite the rejection of their rectification application on the grounds of seeking re-examination beyond the scope of Section 161. They sought a remand to properly defend themselves, relying on the Allahabad High Court's decision in M/s. Katyal Industries v. State of UP. Revenue's arguments: The revenue contended that cancellation of registration under Section 29(3) of the CGST Act does not extinguish prior liabilities. They argued that the petitioner had an obligation to check the portal as the order was duly intimated and that the petitioner failed to appear for hearings despite notices, even during the rectification proceedings. The revenue suggested that the petitioner could prefer an appeal against the impugned order.