Vishal Kumar Singh vs. The Union Of INDIA And 4 Ors
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The petitioner, Vishal Kumar Singh, a businessman registered under the CGST Act, 2017, had his GST registration cancelled by an order dated 02.03.2023. This cancellation was based on a Show Cause Notice dated 15.01.2023, citing non-furnishing of returns for a continuous period of six or more months, as per Section 29(2)(c) of the CGST Act, 2017. Although the petitioner did not submit a reply to the show cause notice, the cancellation order recorded that a reply dated 15.02.2023 was examined. The petitioner approached the High Court after failing to file an application for revocation of cancellation and an appeal under Section 107 of the CGST Act due to elapsed time limits.
Held
The Court held that the impugned order cancelling the petitioner's GST registration should be interfered with and set aside. The reasoning was based on the fact that the registration was cancelled under Section 29(2)(c) for non-submission of returns for six months. The Court noted the provisions of Rule 22(4) of the CGST Rules, 2017, which allow for dropping proceedings if the noticee furnishes all pending returns and makes full payment of tax dues, along with applicable interest and late fee. The Court also considered the petitioner's undertaking to comply with such terms and the consistent orders passed by coordinate benches in similar matters. The ratio decidendi is that in cases of GST registration cancellation for non-filing of returns due to circumstances like the pandemic, and where the assessee is willing to clear all dues and file pending returns, the registration should be restored to ensure compliance with statutory obligations and protect revenue interest. The Court directed the petitioner to approach the concerned authority within one month for revocation and restoration, upon which the authority would intimate the outstanding dues, and upon payment, restore the registration.
Key Issues
1. Whether the cancellation of the petitioner's GST registration under Section 29(2)(c) of the CGST Act, 2017, for non-furnishing of returns for a continuous period of six months or more, was justified, considering the petitioner's claim of inability to file returns due to the Covid-19 pandemic. Petitioner's arguments: The petitioner contended that the non-furnishing of returns was due to reasons beyond his control, specifically the emergence and continuance of the Covid-19 pandemic, which severely affected his business financially. He argued that after the situation improved, he filed all pending returns up to March 2023, but could not file for revocation or appeal due to time limitations. He relied on previous orders of the High Court in similar cases for restoration of GST registration. Revenue's arguments: The Standing Counsel for CGST did not dispute the passing of orders by coordinate benches in similar cases.
Sections Cited
Section 29, Section 39, Section 107, Rule 22
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Cause title — parties, addresses and appearances
ORDER Date : 01-02-2024 Heard Mr. S.K. Agarwal, learned counsel for the petitioner and Mr. B.N. Gogoi, learned Standing Counsel, CGST for all the respondents.
It is the case of the petitioner that the petitioner is a businessman having its place of business at Moran, District – Dibrugarh and he carries out business of works contract. For the purpose of carrying out his business, the petitioner got himself registered under the Central Goods and Services Tax [CGST] Act, 2017 with Registration no. 18IMBPS5029E1ZV.
The petitioner was issued a Show Cause Notice on 15.01.2023 asking him to show cause as to why the registration certificate issued under the Central Goods and Services Tax [CGST] Act, 2017 in his favour should not be cancelled due to non-furnishing of returns in compliance of the provisions of Section 39 of the CGST Act, 2017 for a continuous period of 6 [six] or more months. The petitioner was thereby directed to furnish his reply within a period of thirty days from the date of service of the Show Cause Notice and was also asked to appear in person before the authority issuing the Show Cause Notice on 11.02.2023. Though the petitioner did not submit any reply in response to the Show Cause Notice dated 15.01.2023, the authority issuing the Show Cause Notice cancelled the GST registration of the petitioner by an Order dated 02.03.2023 in Form GST REG-19 w.e.f. 02.03.2023, after recording that he had examined the petitioner’s reply dated 15.02.2023 submitted response to the Show Cause Notice dated 15.01.2023. 3. Section 39[1] of the CGST Act, 2017 inter alia requires a registered person to furnish a return for every calendar month or part thereof, electronically, of inward and outward supplies
Page No. 3/6 of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed.
Mr. Agarwal, learned counsel appearing for the petitioner has submitted that during the concerned period, the petitioner could not submit the returns required to be submitted under Section 39[1] of the CGST Act for a period of more than 6 [six] months due to reasons beyond his control, more particularly, due to emergence and continuance of Covid-19 Pandemic. It has been submitted that due to continuance of Covid-19 Pandemic for a prolonged period, the business of the petitioner got badly affected and the petitioner had suffered a lot financially. It was due to such reasons, the petitioner defaulted in complying with the provisions of the CGST Act, thereby, failed to file the statutory returns within due dates, resulting in defaults for a period of more than 6 [six] months. It has been submitted that after improvement of the Covid-19 situation and with gradual revival of business, the petitioner had filed its returns upto March, 2023 as allowed by the GST portal. After filing of the returns, the petitioner tried to file an application for revocation of his cancellation of GST registration. But the same could not be filed as the time limit prescribed for filing application for revocation of cancellation had already elapsed. Thereafter, the petitioner tried to approach the appellate authority to file an appeal under Section 107 of the GST Act, 2017. As the period of limitation to file an appeal under Section 107 of the CGST Act had already elapsed and the appeal could not be filed, the petitioner has approached this court by the present petition.
As per Section 29[2][c], an officer, duly empowered, may cancel the GST registration of a person from such date, including from any retrospective date, as he deems fit, where any registered person has not furnished returns for a continuous period of 6 [six] months. Rule 22 of the CGST Rules, 2017 has laid down the procedure for cancellation of the registration. For ready reference, Rule 22 of the CGST Rules, 2017 is quoted herein below in its entirety :-
Rule 22 : Cancellation of Registration
Page No. 4/6 [1] Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under Section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled. [2] The reply to the show cause notice issued under sub-rule [1] shall be furnished in FORM REG-18 within the period specified in the said sub-rule. [3] Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted under Rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule [1], or under sub-rule (2A) of Rule 21A cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub- section [5] of Section 29. [4] Where the reply furnished under sub-rule [2] or in response to the notice issued under sub-rule (2A) of Rule 21A is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20 : Provided that where the person instead of replying to the notice served under sub-rule [1] for contravention of the provisions contained in Clause [b] or Clause [c] of sub-section [2] of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20. [5] The provisions of sub-rule [3] shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself.
It is discernible from a reading of the proviso to sub-rule [4] of Rule 22 of the CGST Rules 2017 that if a person who has been served with a show cause notice under Section 29[2][c] of the CGST Act, 2017, is ready and willing to furnish all the pending returns and to make full payment of the tax itself along with applicable interest and late fee, the officer, duly
Page No. 5/6 empowered, can drop the proceedings and pass an order in the prescribed Form i.e. Form GST REG-20. 7. Mr. Agarwal, learned counsel for the petitioner has submitted that this Court in a number of writ petitions, preferred by similarly situated persons, has passed orders for restoration of GST registration. He has referred to the orders passed in a number of writ petitions, that is, W.P.[C] no. 6175/2022, W.P.[C] no. 576/2023, W.P.[C] no. 6930/2023, W.P[C] no. 6366/2023, etc. and has prayed for a similar nature of order.
Mr. Gogoi, learned Standing Counsel, CGST has not disputed the fact of passing orders by the coordinate benches of this Court, as mentioned in the preceding paragraph, in respect of similarly situated persons, whose GST registrations were cancelled on similar grounds.
The petitioner firm carries out works contracts. Under the GST regime, the petitioner was/would be required to pay the necessary dues under the CGST Act or the SGST Act, as the case may be, or both. These statutory dues are required to be paid by all entities, who are registered under the GST regime. Such payments of statutory dues contribute towards revenue. If the petitioner is not included within the GST regime, then any statutory dues that may be required to be deposited by the petitioner would not be deposited and properly accounted for and such a situation is not in the interest of the revenue. Therefore, in order that the petitioner is required to comply with his statutory obligations of payment of taxes under the GST regime, it would be necessary for the departmental authorities to reconsider the prayer of the petitioner for revocation of cancellation of his GST registration.
Having regard to : the fact that the GST registration of the petitioner has been canceled under Section 29[2][c] of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 [six] months and more; the provisions contained in Rule 22 of the CGST Rules, 2017 which provides that if a noticee receiving a notice under Rule 22[1], furnishes all the pending returns and makes full payment of the tax dues, along with applicable interest and late fee, the proper officer is required to drop the proceedings; the undertaking given on behalf of the petitioner that he is ready and willing to comply such Page No. 6/6 terms; and the orders passed by the coordinate benches of this Court as well as by this Court in similar matters whereby the writ petitions have been disposed of with a direction to the respondent authorities to revoke the cancellation of registration upon due payment of all statutory dues payable by the petitioners therein; this Court is of the considered view that no purpose will be served by keeping this writ petition pending and the present writ petition can be disposed of in similar terms, as had been passed in similar writ petitions.
Accordingly, the impugned Order dated 02.03.2023 is hereby interfered with and set aside. The petitioner is directed to approach the concerned authority within a period of 1 [one] month from today, seeking revocation of cancellation and restoration of his GST registration. On such approach by the petitioner, the concerned authority will intimate the petitioner the total outstanding statutory dues, if any, standing in the name of the petitioner till the date of cancellation of registration and any other outstanding dues under the GST Act required to be paid by the petitioner. Upon such intimation, such amount shall be deposited by the petitioner within the time limit mentioned by the concerned authority and upon such payment of the statutory dues under the GST Act by the petitioner, the concerned authority will pass appropriate order to revoke the cancellation of registration, for restoring the GST registration of the petitioner.
With the observations made and directions given above, the writ petition is disposed of. No cost.
JUDGE Comparing Assistant
Reproduced from the public record of the Gauhati High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.