Tvl. Raja Stores vs. The Assistant Commissioner (St)

Held

The Court allowed the writ petition and quashed the impugned order. The Court reasoned that Section 65 of the CGST Act, 2017, explicitly refers to conducting audits of 'any registered person'. This implies that the provision is applicable only to entities that are currently registered under the Act. Since the petitioner's registration had been cancelled, they were no longer a 'registered person' for the purpose of Section 65. The Court acknowledged the respondent's contention that the audit was for a period when the petitioner was registered, but held that the respondent could not suddenly conduct an audit after failing to do so for all those years. However, the Court clarified that this decision would not preclude the respondent from initiating assessment proceedings under Sections 73 and 74 of the Act for the relevant periods. The ratio decidendi is that Section 65 of the CGST Act, 2017, pertains to audits of currently registered persons, and an audit cannot be initiated under this section for a period after the cancellation of registration, although assessment proceedings remain an option.

Facts

The petitioner, Tvl. Raja Stores, a registered taxpayer under the GST Act, 2017, was permitted by the authorities to close its business effective March 31, 2023. Despite this, the petitioner failed to pay the collected tax. Subsequently, the respondent, the Assistant Commissioner (ST), issued an impugned show cause notice dated May 19, 2023, for conducting an audit for the tax period 2019-2020. The petitioner challenged this notice by filing a writ petition before the High Court, arguing that the respondent lacked jurisdiction to conduct an audit as the petitioner's registration had been cancelled and it was no longer a registered concern. The respondent contended that the writ petition was premature as the petitioner had not filed a reply to the show cause notice and that the audit was permissible for the period when the petitioner was registered.

Key Issues

1. Whether the respondent has the jurisdiction to conduct an audit under Section 65 of the CGST Act, 2017, for a period when the petitioner's GST registration has been cancelled and the business is no longer a registered concern? (Question of law) Petitioner's arguments: The petitioner contended that Section 65 of the CGST Act, 2017, specifically empowers the Commissioner or an authorized officer to conduct an audit of 'any registered person'. As the petitioner's registration was cancelled, it was no longer a registered concern, and therefore, the respondent lacked jurisdiction to conduct an audit. The petitioner argued that the provision for audit applies only to existing registered entities. Respondent's arguments: The respondent argued that the writ petition was not maintainable at the show cause notice stage and that the petitioner was obligated to submit a reply before the authorities. The respondent further contended that the audit was being conducted for the period 2017-2018 to 2021-2022, during which the petitioner was a registered firm, and thus, the respondent was empowered to conduct the audit for that specific period.