M/S Darshan Housingh And Finance (Trade Name) Proprietor Pramod Kumar Sethi Through Its Proprietor S vs. The Central Board Of Indirect Taxes And Customs Good And Service Tax

Held

The Court held that the cancellation of GST registration was based on a mechanical application of the law without considering the bonafide reasons for non-furnishing returns during the COVID-19 pandemic. The Court noted the Supreme Court's orders extending limitation periods, which provided protection to taxpayers. The petitioner's admitted tax liability was Rs. 41,20,499/-. The Court directed the petitioner to pay the entire tax amount within one month from the date of the order, permitting withdrawal of Rs. 25,33,452.18/- from the frozen bank account for this purpose. Upon deposit, the GST registration was to be revived, and pending returns were to be filed. The interest and penalty amount were to be paid in 12 equal installments after the registration revival. This was granted as a first and last opportunity.

Facts

The petitioner, M/s Darshan Housing and Finance, through its proprietor Pramod Kumar Sethi, filed a writ petition challenging the cancellation of its GST registration. The cancellation, effective from 15.03.2022, was based on non-furnishing of returns for a continuous period of six months, as per an order under Section 29(2)(c) of the CGST Act. This cancellation was affirmed by an appellate order under Section 107 of the CGST Act. The petitioner sought revival of its registration, offering to pay the outstanding tax and penalty. The revenue stated that while registration could be restored upon payment, no installment benefit was available. The petitioner admitted a tax liability of Rs. 41,20,499/-.

Key Issues

1. Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017, for non-furnishing of returns for a continuous period of six months, is sustainable when the non-furnishing period was impacted by the COVID-19 pandemic and the Supreme Court's extension of limitation orders? Petitioner's contention: The petitioner argued that the non-furnishing of returns was due to bonafide reasons stemming from the COVID-19 pandemic, citing the Supreme Court's suo motu writ petitions extending limitation periods. They also expressed willingness to pay the entire tax and penalty, seeking revival of registration. Revenue's contention: The respondents submitted that while the GST registration would be restored if the petitioner paid the tax and penalty, there was no provision for granting installments for payment.