Mohanraj Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court)
Summary: The Karnataka High Court at Bengaluru, in Sri Mohanraj Vs Assistant Commissioner of Commercial Taxes, allowed a writ petition challenging cancellation of the GST registration of M/s Yogith Metals. The petitioner had obtained registration on 14 February 2022 and filed returns from March 2022 to January 2023. According to the petitioner, financial difficulties prevented the filing of returns for February and March 2023, and business operations had ceased from April 2023. A show cause notice was issued on 5 September 2023, followed by an order cancelling registration on 16 March 2024. The petitioner sought an opportunity to respond to the notice and contest the cancellation.
The petitioner submitted that although returns remained outstanding, the cancellation order proceeded on an alleged contravention of Rule 21(d) read with Rule 10A of the CGST Rules, 2017, concerning non-furnishing of bank account details. Counsel offered to produce bank statements for the relevant period, file the necessary returns and discharge applicable taxes, interest and penalties. The Government Pleader acknowledged that the show cause notice had not informed the petitioner of the alleged failure to furnish bank account details under Rule 10A before filing the first return. This omission became material to the High Court’s consideration of whether the cancellation proceedings should be reopened.
Considering the inadequate notice of the bank-account allegation, the petitioner’s business circumstances and willingness to regularise outstanding compliance, the High Court intervened. It quashed the cancellation order dated 16 March 2024 and allowed the petitioner to file a reply with supporting documents and a certified copy of the judgment by 11 November 2026, without further notice. The Assistant Commissioner was directed to consider the response, returns and willingness to pay taxes, penalties and interest before passing appropriate orders. The Court did not itself direct unconditional restoration of GST registration or waive outstanding liabilities; it restored the opportunity for consideration by the competent authority.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner’s grievance is with the cancellation of the GST registration. The cancellation vide Order dated 16.03.2024 [Annexure – D] is after the Show Cause Notice dated 05.09.2023 [Annexure – C]. Ms. Rama P V, the learned counsel for the petitioner, arguing for this Court’s interference with restoration of the proceedings with opportunity to the petitioner to file response to the Show Cause Notice dated 05.09.2023, canvasses the following:
[A] The petitioner was permitted GST registration on 14.02.2022.
[B] The petitioner has filed all returns between March 2022 and January 2023.
[C] The petitioner for financial constraints could not file returns for February, 2023 and March 2023 and continue the business from April 2023.
[D] The petitioner, not being very acquainted with the respondent’s Income Tax infrastructure, has not verified the Portal for the Show Cause Notice or the Order.
2. On merits, Ms. Rama P.V., submits that the petitioner has not filed returns, but the impugned Order is in the premise that the petitioner has violated Rule 21(d) of the Central Goods and Services Rules, 2017 [for short, ‘the CGST Rules’], because, contrary to Rule 10A of the CGST Rules, the petitioner has not filed bank account. The petitioner can not only now produce Bank Statement from the relevant date but also pay all demands including penalty and interest. The learned counsel submits that this Court may consider interference, as requested, to the petitioner to resume business with the tides turning in favour of the petitioner for continuance of the business.
3. Ms. Jyoti M. Maradi, a learned High Court Government Pleader, is heard and she submits that this Court may consider passing just orders in the light of the fact that the petitioner has not been put on notice in issuing the Show Cause Notice dated 05.09.2023 on the petitioner’s alleged failure to file bank account as required under Rule 10A of the CGST Rules before filing the first return.
4. If this persuades this Court, the petitioner’s circumstances viz., that he has been out of business from April 2023, and that he is now willing to offer all taxes and pay penalty and interest and file necessary returns, also persuades this Court to intervene to restore the proceedings with opportunity to the petitioner to file reply. Hence, the following.
ORDER
[A] The petition is allowed.
[B] The impugned Order dated 16.03.2024 [Annexure-D] is quashed with opportunity to the petitioner to file response along with a certified copy of this order with the first respondent.
[C] The petitioner shall file response and documents as aforesaid without further notice by 11.11.2026.
[D] The first respondent is called upon to consider the response, the returns filed and the petitioner’s willingness to offer taxes and pay penalty and interest and pass just orders.
