M/S M.S. Rainbow Products vs. Commissioner Of Central Goods And Services Tax And Others
Original PDF →Facts
The petitioner, M/s M.S. Rainbow Products, challenges an order dated December 19, 2023, cancelling its GST registration and an order dated May 27, 2024, rejecting its application for condonation of delay in filing for revocation. The petitioner, holding GSTIN 07AAOFM4020C1ZO, failed to file returns for six consecutive months. Consequently, a show cause notice was issued on November 13, 2023, proposing cancellation of registration under Section 39 of the CGST Act due to non-furnishing of returns. The petitioner's registration was suspended on the same date. The petitioner did not respond to the show cause notice, leading to the cancellation of its registration effective April 1, 2023. The petitioner later applied for revocation, citing a dispute with its accountant, but the application was rejected as it was filed beyond the 90-day period.
Held
The Court allowed the petition, directing the respondents to restore the petitioner's GST registration. The restoration is conditional upon the petitioner filing all necessary returns and paying all outstanding dues, along with interest, within one week of the registration being restored. The Court reasoned that while the petitioner had defaulted, its explanation and undertaking to rectify the non-compliance were significant. The Court referred to its previous decisions and the Madras High Court's view in TVL. Suguna Cutpiece Centre, emphasizing that the department's objective should not be to prevent taxpayers from conducting their business. The Court clarified that if the petitioner fails to comply with the undertaking, the respondents are at liberty to proceed with the cancellation of registration. It was also clarified that this order does not preclude the respondents from initiating other actions for non-compliance or recovery of amounts due. No issue was expressly left undecided.
Key Issues
1. Whether the petitioner's GST registration, cancelled due to non-furnishing of returns for six consecutive months under Section 39 of the CGST Act, should be restored, considering the explanation provided and the undertaking to file returns and pay dues. Petitioner's arguments: The petitioner admits non-compliance with Section 39 of the CGST Act but attributes it to a dispute with its accountant. It undertakes to file all pending GST returns and pay outstanding dues, including interest, within a week of registration restoration. The petitioner relies on the principle that the department's objective should not be to preclude taxpayers from carrying on business, citing TVL. Suguna Cutpiece Centre v. Appellate Deputy Commissioner (ST) (GST), Salem and M/s Rakesh Enterprises v. The Principal Commissioner Central Goods and Services Tax & Ors. Revenue's arguments: The judgment records no specific arguments from the revenue or respondents.
Sections Cited
Section 39
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W.P.(C) 8964/2024 $~5 * IN THE HIGH COURT OF DELHI AT NEW DELHI %
Date of Decision :11.07.2024 + W.P.(C) 8964/2024, CM APPL.36626/2024 (Exemption) & CM APPL.36627/2024 (Stay)
M/S M.S. RAINBOW PRODUCTS
.....Petitioner
Through: Advocate (appearance not given)
versus
COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX AND OTHERS .....Respondents Through: Mr. Shashank Sharma, Sr. Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE SACHIN DATTA
VIBHU BAKHRU, J. (ORAL)
Issue notice.
The learned counsel for the respondents accept notice.
The petitioner has filed the present petition impugning an order dated 19.12.2023 (hereafter the impugned cancellation order), whereby the petitioner’s GST registration was cancelled and an order dated 27.05.2024, whereby the petitioner’s application for condonation of delay in filing an application for revocation of the impugned cancellation order was rejected.
The petitioner was registered with the GST Authorities and was assigned the Goods and Services Tax Identification Number – GSTIN 07AAOFM4020C1ZO. The petitioner had defaulted in filing its returns for a consecutive period of six months. W.P.(C) 8964/2024 5. In view of the above, the Proper Officer issued a show cause notice dated 13.11.2023 (hereafter the SCN) calling upon the petitioner to show cause as to why its GST Registration not be cancelled on account of failure to furnish the returns under Section 39 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) for a continuous period of six months. The petitioner was called upon to respond to the said SCN within a period of thirty days from the date of the SCN and was directed to appear before the Proper Officer on 11.12.2023. The petitioner’s GST Registration was also suspended on the same date – 13.11.2023. 6. The petitioner did not respond to the SCN. Resultantly, by an order dated 19.12.2023, the petitioner’s GST Registration was cancelled with effect from 01.04.2023. 7. The petitioner made an application for revocation of the impugned cancellation order, whereby its registration was cancelled. The petitioner stated that there was some dispute with its accountant and, therefore, it was unable to file the application for revocation of the impugned cancellation order cancelling the petitioner’s GST Registration. He also undertook to file its GST return and to pay all its dues, if any, within a week of the respondents restoring its GST Registration. The Proper Officer dismissed the petitioner’s application as it was filed beyond the stipulated period of ninety days.
The petitioner does not dispute that he has defaulted in compliance with the provisions of Section 39 of the CGST Act and had not filed the returns as required. However, he has set out an explanation for the same and undertakes that all returns will be filed and outstanding dues will be paid.
In TVL. Suguna Cutpiece Centre v. Appellate Deputy Commissioner
W.P.(C) 8964/2024 (ST) (GST), SALEM: 2022 (61) G.S.T.L. 515 (Mad), the Hon’ble High Court of Madras has considered import of the actions of cancellation of the Taxpayer’s GST Registration and noticed that department’s object cannot be to preclude taxpayers from carrying on their business. This Court has also taken a similar view in M/s Rakesh Enterprises v. The Principal Commissioner Central Goods and Services Tax & Ors.: Neutral Citaion No. 2023/DHC/001018. 10. In view of the above, we consider it apposite to allow the present petition and direct the respondents to restore the petitioner’s GST Registration. However, this is subject to the condition that the petitioner shall immediately within a period of one week of the petitioner’s GST Registration being restored, file the necessary returns and pay all its dues along with interest.
In the event, the petitioner does not comply with the aforesaid undertaking, the respondent shall proceed to cancel the petitioner’s GST Registration.
It is also clarified that this would not preclude the respondent authorities from initiating any other action for non-compliance with the statutory provisions or recovery of any amount that may be due.
The petition is disposed of in the aforesaid terms. Pending applications are also disposed of.
VIBHU BAKHRU, J
SACHIN DATTA, J JULY 11, 2024 r
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.