Lakshminarayana vs. The Assistant Commissioner

Held

The Court, aiming to serve the larger ends of justice and balance equities, inclined to allow the petitioner to pay the outstanding amount in ten equal installments. The Court reasoned that if the industry restarts functioning, it would be in a position to satisfy the respondents' demand, generate business, pay future taxes, and provide employment. Accordingly, the Court directed respondent no.2 to quantify the exact amount payable by the petitioner, including penalty and interest, and communicate it within two weeks. The petitioner was then directed to pay this amount in ten equal monthly installments, commencing from January 15, 2022, and by the 5th of each subsequent month. Failure to adhere to this schedule would empower the respondents to pursue recovery. The Court also directed the authorities to restore the petitioner's registration within two weeks of receiving the order, with the caveat that any default in installment payments would automatically lead to the cancellation of registration. No issue was expressly left undecided.

Facts

The petitioner, M/s. Lakshminarayana Cottons, filed a writ petition challenging an order dated 25.06.2021 by the Chief Commissioner of Central Tax (GST) rejecting their application under Section 80 of the CGST Act and the action of the Superintendent of Central Tax (GST) in cancelling their registration. The petitioner explained that business losses and non-receipt of State Government incentives led to non-payment of taxes for the period December 2017 to December 2018. The petitioner sought indulgence to resume operations and repay dues in installments. The respondents indicated the outstanding amount was approximately Rs. 1.25 crores. The petitioner requested a specific computation of dues, including penalty and interest, and a 12-month period for repayment in monthly installments, along with restoration of their registration.

Key Issues

1. Whether the petitioner's registration, cancelled by the respondent authorities, should be restored to enable them to resume business and clear their tax dues? (Mixed question of law and fact, concerning the powers of the authorities under the CGST Act and Rules). 2. Whether the petitioner should be granted an extended period to pay the outstanding tax dues, including penalty and interest, in installments? (Mixed question of law and fact, concerning the discretion of the Court to grant relief and the provisions for payment of dues). Petitioner's arguments: The petitioner argued that due to business losses and external factors, they were unable to pay taxes for a specific period. They sought restoration of their registration to restart operations and requested a structured payment plan over 12 months, with the authorities first providing a clear computation of the total amount due, including penalty and interest. They relied on the principle of balancing equities and serving larger ends of justice. Respondents' arguments: The respondents stated that the outstanding amount was approximately Rs. 1.25 crores. They contended that the petitioner had already availed over two years and suggested that the Court should not grant more than six months for repayment.