APITCO Ltd. Vs Union of India and Ors. (Telangana High Court)
Summary: The Telangana High Court, in APITCO Ltd. Vs Union of India and Ors., allowed a writ petition challenging the cancellation of the petitioner’s GST registration on account of continuous non-filing of returns for more than six months. The petitioner challenged the cancellation order dated 18 April 2023, which had been given retrospective effect from 28 February 2019. A Division Bench comprising Justice P. Sam Koshy and Justice N. Tukaramji, by order dated 28 February 2024, directed restoration of the GST registration as a one-time measure, subject to the petitioner filing all outstanding returns and paying applicable late fees and penalties. The Court considered the disruption caused by the COVID-19 pandemic, the petitioner’s circumstances and judicial precedents favouring a pragmatic approach to restoration of cancelled registrations.
The petitioner, APITCO Ltd., was incorporated in 1976 and described in the judgment as a public sector unit jointly promoted by the Andhra Pradesh State Government, All India Financial Institutions and public sector banks, including IFCI, IDBI, ICICI, APSFC and SIDBI. Its accounts were audited by the Comptroller and Auditor General. The company provided technical, management and development consultancy services and implemented various welfare and training programmes for the Central and State Governments. It was registered under GST and had filed returns regularly, wherever applicable, up to February 2019.
According to the petitioner, compliance difficulties arose because of the COVID-19 pandemic, employee attrition resulting from superannuation, retirement and resignations, and a change in management during 2022. These circumstances disrupted regular filing of GST returns. The petitioner stated that it had nevertheless made ad hoc CGST and SGST payments aggregating Rs.44,15,186 during the financial years 2018-19 to 2021-22. These payments comprised Rs.16,90,367 for FY 2018-19, Rs.7,24,819 for FY 2019-20, nil for FY 2020-21 and Rs.20,00,000 for FY 2021-22.
The GST authorities issued a show cause notice on 14 January 2023 alleging non-filing of returns for more than six months. Although the petitioner submitted its reply, the Deputy State Tax Officer cancelled the registration through an order dated 18 April 2023. The petitioner contended that the order had been passed without any further enquiry, explanation or opportunity of hearing. It submitted that cancellation would cause irreparable loss and would not substantially benefit the Government. The petitioner expressed willingness to rectify the defaults by furnishing the outstanding returns and paying the applicable fines and penalties.
The State’s counsel opposed the petition, contending that the show cause notice had been duly served and that the petitioner had promptly replied to it. Nevertheless, the statutory default of continuous non-filing had not been remedied despite the notice. The Revenue therefore maintained that cancellation was justified and that the petitioner was not entitled to discretionary relief. The High Court examined both sides’ submissions against the factual circumstances and the decisions concerning cancellation and restoration of GST registration.
The High Court referred to the Delhi High Court’s decision in Kritika Agarwal Vs Union of India and Others, which emphasised that cancellation of GST registration should be exercised with circumspection and only where necessary. The Bench observed that tax authorities should adopt a pragmatic approach instead of mechanically resorting to cancellation. The Court also referred to a previous Division Bench decision of the Telangana High Court in W.P. No. 36174 of 2022, where the matter had been remanded for fresh consideration.
The Court further considered the Madras High Court’s decision in Tvl. Sastha Engineering Works Vs State Tax Officer, which reproduced the extensive compliance conditions prescribed in Tvl. Suguna Cutpiece Center Vs Appellate Deputy Commissioner (ST) (GST). Those directions contemplated the filing of pending returns, payment of unpaid tax, interest and statutory fees, scrutiny of input tax credit and safeguards against improper utilisation or passing of credit. The Court noted that the Madras High Court had consistently extended similar relief in subsequent cases.
Considering these authorities, the Telangana High Court held that where the default was confined to non-furnishing of returns, restoration of GST registration upon rectification would enable the taxpayer to continue its business while generating revenue for the Government. The Court accepted the petitioner’s undertaking to file the missing returns and pay the applicable late fees and penalties. It directed the petitioner to appear before the respondent authorities by 12 March 2024 and furnish all outstanding GST returns up to date, together with the requisite statutory payments.
The High Court directed that, upon such compliance, the authorities should forthwith restore the GST registration without further scrutiny concerning the existing return-filing default. It clarified that the relief was a one-time measure and that the cancellation order dated 18 April 2023 would automatically cease to operate upon fulfilment of the prescribed conditions. The writ petition was allowed without costs and pending miscellaneous petitions were closed. The decision provides an example of judicial relief against GST registration cancellation where a taxpayer undertakes to regularise return-filing defaults and discharge applicable statutory liabilities.
Cases Discussed
1. Kritika Agarwal Vs Union of India and Others (Delhi High Court) — W.P.(C) 9424/2023 and CM Nos. 36000/2023 and 36001/2023. Relied upon for the principle that cancellation of GST registration must be exercised with circumspection and should not be adopted mechanically.
2. Tvl. Sastha Engineering Works, Represented by its Partner Vs State Tax Officer (Circle) and Another (Madras High Court) — 2022 SCC OnLine Mad 8452. The Telangana High Court reproduced paragraphs 4 to 7 of this decision, including directions for restoration of cancelled GST registrations.
3. Tvl. Suguna Cutpiece Center Vs Appellate Deputy Commissioner (ST) (GST) and Others (Madras High Court) — W.P. Nos. 25048, 25877, 12738 of 2021 and connected batch, decided on 31.01.2022. The Court considered the detailed conditions permitting revival of cancelled GST registration upon tax compliance.
4. Maaruthi Foundations Private Limited Vs Deputy Commissioner (ST) (FAC) (Madras High Court) — 2022 (5) TMI 405. Referred to in the quoted Madras High Court judgment as a subsequent decision following Suguna Cutpiece.
5. J. Jayakrishnan Vs Additional Chief Secretary/Commissioner of Commercial Taxes, Chennai (Madras High Court) — 2022 (7) TMI 1226. Cited among the decisions consistently following the directions in Suguna Cutpiece.
6. TVL. Jeyalakshmi Store Represented by its Proprietor Sivanu Pandian Vs Commissioner of Commercial Taxes (Madras High Court) — 2022 (7) TMI 1275. Mentioned as another decision following the same restoration framework.
7. Pearl and Company Vs Commissioner of Commercial Taxes (Madras High Court) — W.P.(MD) No. 19127 of 2022. Cited in the quoted judicial extract as an authority applying the Suguna Cutpiece approach.
8. Decision of Telangana High Court in W.P. No. 36174 of 2022 — Order stated in the source as dated 20.09.2021. Referred to in paragraph 11 concerning the setting aside of an appellate order and remand for fresh consideration. The case name is not supplied in the source judgment.
FULL TEXT OF THE ORDER OF TELANGANA HIGH COURT
The challenge in the present Writ Petition is to the order dated 18.04.2023 passed by respondent No.3/The Deputy State Tax Officer cancelling the GST registration of the petitioner. The effective date of cancellation of registration is 28.02.2019.
2. Heard Dr. S.V. Rama Krishna, learned counsel for the petitioner, Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India appearing for respondent No.1 and Mr. Bhaskar Reddy, learned Standing Counsel for Commercial Taxes appearing for the respondent Nos.2 to 4.
3. It appears that the rejection has been made primarily on the ground that the petitioner has failed to file their returns for more than six (06) months continuously.
4. The petitioner herein is a company incorporated in the year 1976 and is a Public Sector Unit (PSU) jointly promoted by A.P. State Govt., All India Financial Institutions and Public Sector Banks such as IFCI, IDBI, ICICI, APSFC, SIDBI etc. and its accounts are audited by Comptroller and Auditor General (CAG). The petitioner is a technical consultancy service organization engaged in providing technical support services to the industry by undertaking technical, management and development consultancy services and also implements various welfare and training programmes on behalf of the Central and State Governments under different schemes across the country.
5. In addition, the petitioner is also registered with the GST Authorities and is given GST No.36AABCA7348D2ZU under the Goods and Services Tax Act, 2016 (for short, ‘the Act’) and regular in filing returns wherever applicable up till February, 2019. Thereafter, due to Covid pandemic, attrition of employees due to superannuation, retirement and resignations during this trouble period coupled with change of management in the year 2022, there were some missings in filing GST returns regularly on behalf of the petitioner. During the years 2018-2019 to 2021-2022, the petitioner made the following ad-hoc amounts towards CGST/SGST:
| For the financial year 2018-19 | — Rs.16,90,367/- |
| For the financial year 2019-20 | — Rs.7,24,819/- |
| For the financial year 2020-21 | — nil |
| For the financial year 2021-22 | — Rs.20,00,000/- |
| Total amount paid | — Rs. 44,15,186/- |
6. However, because of the impact of Covid pandemic and the consequences that arose thereafter, the petitioner could not file required returns from time to time leading to issuance of a show cause notice on 14.01.2023. Though the petitioner had replied to the same, however, without any further enquiry or an explanation or an opportunity of hearing, the impugned order has been straightaway passed.
7. Learned counsel for the petitioner submits that given a chance, the petitioner shall make good the default so far as non-filing of the returns are concerned and the petitioner is also ready to pay the requisite fine and penalty if any and the order of cancellation of registration accordingly be restored, or else the petitioner would be put to irreparable loss. Moreover, the cancellation of registration is not in the interest of either of the parties inasmuch as the Government is also not going to gain much.
8. Learned Standing Counsel for Commercial Taxes on the other hand contended that plain reading of the impugned order by itself is self-explanatory inasmuch as it would clearly reflect that the petitioner was issued with a show cause notice which was duly served upon and the petitioner had also replied to the same promptly. Though the petitioner had given the reply to the show cause notice, however, a default of non-furnishing of the returns for a period of six (06) months was not attended to in spite of the show cause notice being issued which has led to cancellation of the registration. As such, the petitioner is not entitled for relief that he seeks for through the present Writ Petition.
9. Having heard the contentions put forth on either side and also going through the factual details that are reflected from the pleadings itself, what is apparently visible is that the show cause notice was issued to the petitioner on 14.01.2023. The charge against the petitioner was that of not furnishing the GST returns for more than six (06) months continuously.
10. At this juncture, it is necessary to appreciate the fact that the show cause notice was that of December, 2020. Everybody knows that since March, 2020, onwards it was Covid pandemic that ripped through the entire country bringing the entire commercial and industrial establishments to a standstill or at least remaining closed for a major part of that period. The business of these establishments including that of the petitioner must have definitely been affected.
11. It is relevant at this juncture to take note of the recent decision of the High Court of Delhi in the case of Kritika Agarwal v. Union of India and others1, wherein the High Court in a case of cancellation of GST registration had observed that:
“the measure of cancellation of GST must be exercised with circumspection and only in cases, where it is necessary”. This in otherwise means that the intention of the Hon’ble Delhi High Court by allowing the writ petition was that the authorities concern should take a more pragmatic approach so far as the case where GST registration is concerned and cancellation should not be restored in a mechanical manner or as a matter of routine. Similar decision has also been passed by Division Bench of this Court in W.P.No.36174 of 2022 vide order dated 20.09.2021, where the Division Bench had set-aside the order of the appellate authority and the matter had been remanded back for fresh consideration on its own merits.”
12. Likewise, there is yet another decision from the High Court of Madras in the case of Tvl. Sastha Engineering Works, Rep by its Partner v. State Tax Officer (Circle) and Another2 wherein the High Court of Madras in paragraph Nos.4 to 7 has held as under:
“4. It is submitted by the learned counsel for the Petitioner that in identical circumstances, this Court, in the case of Tvl.Suguna Cutpiece Vs The Appellate Deputy Commissioner (ST) (GST) and others (W.P.Nos. 25048, 25877, 12738 of 2021 etc., batch), dated 31.01.2022, issued the following directions:
“229. In the light of the above discussion, these Writ Petitions are allowed subject to the following conditions:
i. The petitioners are directed to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid.
ii. It is made clear that such payment of Tax, Interest, fine / fee and etc. shall not be allowed to be made or adjusted from and out of any Input Tax Credit which may be lying unutilized or unclaimed in the hands of these petitioners.
iii. If any Input Tax Credit has remained utilized, it shall not be utilised until it is scrutinized and approved by an appropriate or a competent officer of the Department.
iv. Only such approved Input Tax Credit shall be allowed for being utilized thereafter for discharging future tax liability under the Act and Rule.
v. The petitioners shall also pay GST and file the returns for the period subsequent to the cancellation of the registration by declaring the correct value of supplies and payment of GST shall also be in cash.
vi. If any Input Tax Credit was earned, it shall be allowed to be utilised only after scrutinising and approving by the respondents or any other competent authority.
vii. The respondents may also impose such restrictions / limitation on petitioners as may be warranted to ensure that there is no undue passing of Input Tax Credit pending such exercise and to ensure that there is no violation or an attempt to do bill trading by taking advantage of this order. viii. On payment of tax, penalty and uploading of returns, the registration shall stand revived forthwith.
viii. On payment of tax, penalty and uploading of returns, the registration shall stand revived forthwith.
ix. The respondents shall take suitable steps by instructing GST Network, New Delhi to make suitable changes in the architecture of the GST Web portal to allow these petitioners to file their returns and to pay the tax/penalty/fine.
x. The above exercise shall be carried out by the respondents within a period of thirty (30) days from the date of receipt of a copy of this order.
xi. No cost.
xii. Consequently, connected Miscellaneous Petitions are closed.”
5. The same has been consistently thereafter followed by this Court in various decisions, viz.,
a) M/s.Maaruthi Foundations Private Limited Vs Deputy Commissioner (ST) (FAC), reported in 2022 (5) TMI 405;
b) J. Jayakrishnan Vs The Additional Chief Secretary/Commissioner of Commercial Taxes, Chennai reported in 2022 (7) TMI 1226;
c) TVL.Jeyalakshmi Store represented by its Proprietor, Sivanu Pandian Vs Commissioner of Commercial Taxes reported in 2022 (7) TMI 1275 ;
d) M/s.Pearl and Company Vs The Commissioner of Commercial Taxes in W.P(MD)No.19127 of 2022.
6. In view of the fact that this Court has been consistently following the directions issued in the case of Tvl.Suguna Cutpiece Vs Appellate Deputy Commissioner (ST) (GST) and others (W.P.Nos.25048, 25877, 12738 of 2021 etc., batch) and the Revenue/Department has also accepted the said view as evident from the fact that no appeal has been filed in any of the matters, this Court intends to follow the above order of this Court.
7. In view of the same, this Court feels that the benefit extended by this Court in the earlier orders referred to above in Suguna Cutpiece Centre’s case cited supra, may be extended to the Petitioner.
13. Given the said factual matrix of the case as also the judicial pronouncements that are referred to in the preceding paragraphs, if the default on the part of the petitioner is only so far as non-furnishing of the returns, we are of the considered opinion that subject to the petitioner making good the default, the said GST registration of the petitioner would get restored which would enable the petitioner to carry on his business and which would also generate GST revenue to the respondent authorities as well.
14. Learned counsel for the petitioner has also undertaken to make good the necessary default so far as non-furnishing of the GST returns are concerned along with late fees and penalty that would be applicable.
15. In view of the same, the present Writ Petition stands allowed directing the petitioner to immediately appear before the respondent authorities by 12.03.2024 and upon furnishing the entire GST returns up till date which they have not yet filed along with requisite late fees and penalty if any, the respondent authorities shall forthwith restore the GST registration of the petitioner without any further scrutiny so far as the default of non-payment of GST returns till now is concerned and the same is a onetime measure. It is made clear that upon the petitioner making good the default so far as filing of the returns up till date along with late fees and penalty, the order of cancellation of GST registration of the petitioner dated 18.04.2023 would automatically get restored.
16. The Writ Petition accordingly stands allowed. However, there shall be no order as to costs. Consequently, miscellaneous petitions pending if any, shall stand closed.
1 W.P.(C) 9424/2023 and CM Nos.36000/2023 &36001/2023
2 2022 SCC OnLine Mad 8452
