M/S Dipak Enterprise vs. Union Of INDIA And 3 Ors

Held

The Court held that the impugned order dated 09.12.2021 cancelling the petitioner's GST registration is interfered with and set aside. The reasoning was based on the fact that the cancellation was under Section 29(2)(c) for non-furnishing of returns for six months, the provisions of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, and the consistent practice of coordinate benches of the High Court in similar matters. The proviso to sub-rule (4) of Rule 22 allows for dropping proceedings if pending returns are furnished and tax dues, along with interest and late fees, are paid. The Court also noted that keeping the petitioner out of the GST regime would result in non-collection of statutory dues, which is not in the interest of revenue. The ratio decidendi is that in cases of GST registration cancellation due to non-filing of returns during the pandemic, where the assessee is willing to comply with statutory obligations and pay dues, the cancellation can be revoked, especially in light of judicial precedent and the interest of revenue. The operative direction is for the petitioner to approach the concerned authority within one month for revocation and restoration, upon which the authority will intimate outstanding dues, and upon payment, will revoke the cancellation.

Facts

The petitioner, M/s Dipak Enterprise, a proprietorship firm engaged in works contracts, had its GST registration cancelled by an order dated 09.12.2021. This cancellation was based on a show cause notice issued on 23.11.2021, alleging non-furnishing of returns for a continuous period of six months, as per Section 29(2)(c) of the GST Act, 2017. Although the petitioner did not submit a reply to the show cause notice, the cancellation order stated that the petitioner's reply had been examined. The petitioner claims that non-filing of returns was due to reasons beyond control, specifically the Covid-19 pandemic, which severely affected its business. After the situation improved, the petitioner filed returns up to December 2022, but found that the time limit for filing an application for revocation of cancellation and for filing an appeal had elapsed.

Key Issues

1. Whether the cancellation of the petitioner's GST registration under Section 29(2)(c) of the GST Act, 2017, for non-furnishing of returns for a continuous period of six months, is sustainable, considering the impact of the Covid-19 pandemic. Petitioner's arguments: The petitioner contended that the non-furnishing of returns for over six months was due to reasons beyond its control, namely the Covid-19 pandemic, which financially impacted its business. It further argued that after the situation improved, it filed all pending returns and sought to revoke the cancellation, but the statutory time limits for revocation and appeal had expired. The petitioner relied on orders passed by coordinate benches of the High Court in similar cases for restoration of GST registration. Revenue's arguments: The learned Standing Counsel for CGST did not dispute the fact that similar orders were passed by the court in respect of similarly situated persons whose GST registrations were cancelled on similar grounds.