M/S Ennkay Timbers And Another vs. State Of U.P. And 2 Others

Held

The Court held that the cancellation of GST registration was not justified in the peculiar circumstances. While acknowledging the petitioner's failure to file returns for six consecutive months, the Court took into account the petitioner's expressed willingness to deposit all outstanding tax dues along with interest. The Court was influenced by the judgments of the Kerala High Court in Pazhayidom Food Ventures (P) Ltd. and the Guwahati High Court in M/s. Veteran Facility Management Services Pvt., Ltd., which allowed for the restoration of registration and payment of dues in installments under similar circumstances. The Court directed respondent no.2 to restore the petitioner's GST registration within one week. Subsequently, the petitioner was directed to deposit Rs. 6,00,000/- within a week of registration restoration. Thereafter, respondent no.3 was to inform the petitioner of the remaining outstanding amount, including interest, which the petitioner must pay in six equal monthly installments. The Court found that the petitioner's willingness to clear dues and the mitigating personal circumstances warranted a lenient approach.

Facts

The petitioner, M/s Ennkay Timbers, had its GST registration cancelled by an order dated 18.09.2021, which was confirmed by respondent no.2's order dated 4.8.2022. The petitioner's proprietor, petitioner no.2, failed to file GST returns for six consecutive months (July-August 2021 for GSTR-01 and March-August 2021 for 3B returns) due to mental and financial exhaustion following the loss of his mother and sister. The petitioner expressed willingness to clear all dues with interest, but sought installment payments. An earlier writ petition was dismissed for alternative remedy. The petitioner argues that online tax deposit is impossible without registration restoration. The revenue contends the cancellation is justified due to admitted non-filing of returns and business activity.

Key Issues

1. Whether the cancellation of GST registration under Section 29(2)(c) of the GST Act is justified when the non-filing of returns for six consecutive months was due to unavoidable personal circumstances, and the petitioner is willing to deposit the tax dues with interest in installments? Petitioner's Arguments: The petitioner argued that the non-filing of returns was due to severe personal losses leading to mental and financial exhaustion. They are willing to pay all outstanding tax and interest but require installment facility. They also contended that tax cannot be deposited online without registration restoration. Reliance was placed on Kerala High Court's decision in Pazahyidom Food Ventures (P) Ltd. and Guwahati High Court's decision in M/s. Veteran Facility Management Services Pvt., Ltd. Revenue's Arguments: The revenue argued that the petitioner admitted to not filing returns for over six months, justifying the cancellation. They further submitted that the petitioner was engaged in business activities, realizing GST from customers, but failing to deposit it, making the cancellation appropriate. The revenue prayed for dismissal of the petition.