M/S. Cloudnetworks vs. The Additional Commissioner (Appeals)

Held

The Court allowed the writ petition, setting aside the impugned order of the Additional Commissioner (Appeals). The Court found that the cancellation of GST registration, especially for small-scale entrepreneurs, can be a severe consequence affecting their livelihood. Citing the Bombay High Court's decision in WP.No.11833 of 2022 and its own precedent in Suguna Cutpiece Vs. Appellate Deputy Commissioner (ST), the Court emphasized that the provisions of the GST Act should not be interpreted to deny citizens their constitutional right to carry on trade and commerce. The Court noted that the petitioner was willing to pay all dues, interest, and penalties. The ratio decidendi is that constitutional courts, under Article 226, can exercise their jurisdiction to grant relief when statutory remedies are dismissed on technical grounds, especially when it impacts a person's right to livelihood and when the assessee is willing to regularize their compliance. The Court directed the petitioner to file all pending returns and pay the outstanding tax, interest, fine, and fees within a specified period, with certain conditions regarding the utilization of Input Tax Credit. The registration was to be revived upon compliance.

Facts

The petitioner, M/s.Cloudnetworks, represented by its Proprietor Vijayaveeran, filed a writ petition challenging the order of the Additional Commissioner (Appeals) dated September 22, 2023, which rejected their appeal. The appeal was filed against the cancellation of the petitioner's GST registration (GSTIN: 33AFQPV5816C2Z8) by the Superintendent of GST. The petitioner, involved in cloud networking, failed to continuously file GST returns due to financial crisis. Their GST registration was cancelled without an opportunity of hearing. The appeal was rejected by the first respondent on the grounds of being filed beyond the prescribed time limit. The petitioner contended that the delay in filing the appeal was only 10 days and they were willing to pay interest for belated filing.

Key Issues

1. Whether the cancellation of the petitioner's GST registration was justified, considering the petitioner's claim of financial crisis and willingness to pay dues, interest, and penalties, and the alleged lack of opportunity for hearing? 2. Whether the rejection of the petitioner's appeal by the Additional Commissioner (Appeals) on the grounds of limitation was appropriate, particularly when the delay was only 10 days? Petitioner's Arguments: The petitioner argued that their GST registration was cancelled without providing an adequate opportunity of hearing. They attributed the non-filing of returns to financial difficulties and expressed readiness to pay all outstanding dues, including interest and penalties. They also contended that the appeal was rejected on a technical ground of limitation, despite a minor delay of 10 days, and that their livelihood was affected by the cancellation. Revenue's Arguments: The respondent argued that the petitioner was provided with sufficient opportunities before cancellation, including a show cause notice to which they failed to respond. They further contended that the appeal was rightly rejected as it was filed beyond the limitation period prescribed under Section 107(4) of the GST Act, and therefore, there was no reason to interfere with the impugned order.