Case Law Details
Prasanta Das Vs Superintendent, Range-V CGST & CX (Calcutta High Court)
Introduction: On May 8, 2024, the Calcutta High Court delivered a significant judgment in the case of Prasanta Das Vs. Superintendent, Range-V CGST & CX. The case revolved around the cancellation of GST registration of Prasanta Das, a small businessman and works contractor, due to non-filing of returns during the Covid-19 period. This judgment highlights critical procedural issues and emphasizes the rights of taxpayers under the Central and West Bengal Goods and Services Tax Act, 2017.
Background and Facts of the Case: Prasanta Das, a registered taxpayer under the GST Act, faced challenges due to the cancellation of his GST registration on March 27, 2023. The cancellation was based on his failure to file returns for six consecutive months, which he attributed to difficulties encountered during the Covid-19 pandemic. Following the issuance of a show cause notice on January 14, 2023, Das promptly filed the pending returns on March 16, 2023. Despite this, his registration was canceled, prompting him to seek legal redress.
Petitioner’s Arguments: Represented by Ms. Roychoudhury, Prasanta Das argued that under Rule 22 of the GST Rules, once a taxpayer files all pending returns and pays the due taxes along with interest and late fees, the proceedings for cancellation should be dropped. She emphasized that Das had complied with these requirements before the cancellation order was issued. Despite this compliance, the authorities proceeded with the cancellation, ignoring the filed returns. Das also applied for revocation of the cancellation, which was rejected due to a perceived failure to respond to a further show cause notice.
Respondents’ Counterarguments: Mr. Bhattacharya, representing the CGST authorities, contended that Das had repeatedly failed to comply with GST provisions despite several opportunities. He pointed out that Das did not appear before the authorities and failed to seek condonation of delay when filing a belated appeal. Bhattacharya argued that the petitioner’s conduct did not demonstrate a genuine intention to comply with the law, warranting the cancellation of his registration.
Court’s Judgment and Reasoning: The Calcutta High Court, upon reviewing the facts and arguments, found that the petitioner’s registration was canceled primarily due to non-filing of returns rather than any fraudulent activities to evade taxes. The court acknowledged the petitioner’s subsequent compliance in filing the pending returns and noted that the continuation of business operations would be beneficial for revenue collection.
Citing the principle of pragmatic consideration, the court set aside the cancellation order, emphasizing that penalizing the petitioner by revoking his registration would be counterproductive. The court also referenced a similar case (Subhankar Golder v. Assistant Commissioner of State Tax), where a division bench had taken a lenient view to facilitate business continuity.
The court directed that Prasanta Das’s GST registration be restored, subject to him filing all due returns and paying the requisite taxes, interest, fines, and penalties within four weeks. The authorities were also instructed to activate the portal to enable the petitioner to comply with these requirements.
Conclusion: The judgment in Prasanta Das Vs. Superintendent, Range-V CGST & CX underscores the importance of procedural compliance and taxpayer rights under the GST framework. By setting aside the cancellation of GST registration, the Calcutta High Court highlighted the need for a balanced approach that considers both compliance and the operational challenges faced by small businesses. This ruling not only offers relief to Prasanta Das but also sets a precedent for similar cases, reinforcing the importance of fair and pragmatic enforcement of tax laws.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Affidavit of service filed in Court today is taken on record.
2. The present writ petition has been filed, inter alia, challenging the order of cancellation of registration of the petitioner dated 27th March, 2023, passed under the Central/West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the “said Act”).
3. The petitioner is registered under the provisions of the said Act. The petitioner claims to be a small businessman and a works contractor. According to the petitioner during the Covid period there had been certain defaults in filing of returns. It is in connection therewith, the petitioner was served with a show cause notice dated 14th January, 2023, calling upon the petitioner to show cause as to why the registration of the petitioner under the said Act shall not be cancelled on account of failure on the part of the petitioner to furnish returns under Section 39 of the said Act, for a continuous period of six months.
4. Ms. Roychoudhury, learned advocate representing the petitioner by drawing attention of this Court to the first proviso to Rule 22 of the Central/West Bengal Goods and Services Rules, 2017 (hereinafter referred to the said Rules) submits that once, the show cause as regards the cancellation of registration is issued alleging contravention of the provisions contained in clause (b) or clause (c) of sub-section (2) of Section 29 of the said Act, it is open to the Registered Tax Payer (RTP) without filing its response to the show cause to furnish all pending returns and make payment of all taxes dues along with applicable interest and late fee and once, such compliance is made it is the obligation of the proper officer to drop the proceedings and pass an order in Form GST/REG-20 without insisting for response from the RTP.
5. By drawing attention of this Court to the print out of the track return status taken from the portal of the respondents, she submits that the petitioner had after receipt of the show cause duly filed the returns for the period from 1st April, 2022 to 31st March, 2023 on 16th March, 2023 and once, such returns were filed, it was the obligation of the proper office to take a note of the same. However, in the instant case, the proper officer without appropriately taking note of such returns had proceeded to pass an order of cancellation of registration of the petitioner on 27th March, 2023 on account of the purported failure of the petitioner to furnish returns for a continuous period of six months.
6. Following the aforesaid, the petitioner had promptly on 20th April, 2023 filed an application for revocation of cancellation of registration. Unfortunately, for the petitioner the said application for revocation of cancellation was rejected since the petitioner did not respond to a further show cause issued by the respondents on 26th April, 2023.
7. Being aggrieved, the petitioner had filed an appeal under Section 107 of the said Act and had in the interregnum on 22nd April, 2024 filed returns for the subsequent period.
8. Incidentally, the appeal was dismissed by the appellate authority, inter alia, on the ground that the same was barred by limitation as the same was filed beyond the time prescribed as provided for in Section 107 of the said Act.
9. Interestingly, however, the appellate authority, despite the aforesaid, had gone into the merits of the case and had upheld the order of cancellation.
10. In the facts as noted above, it is submitted that the petitioner who is only a small businessman and is a works contractor should be afforded with a further opportunity to carry out his business.
11. Ms. Roychoudhury, submits that the petitioner is ready and willing to comply with the provisions of the said Act by making payment of all taxes as may be found due.
12. Mr. Bhattacharya, learned advocate representing the respondents on the other hand submits that the petitioner was never interested to comply with the provisions of this Act, despite being afforded with repeated opportunities. The petitioner did not appear before the authorities. None of the documents disclosed in the petition was brought to the notice of the proper officer, for the proper officer to take a decision in that regard. Even while the petitioner filed the appeal belatedly and the same was barred by limitation, no attempt was made by the petitioner to file an application seeking condonation of delay. In the given facts, the conduct of the petitioner does not appear to be bona fide and no relief should be afforded to the petitioner.
13. Heard the learned advocates appearing for the respective parties and considered the materials on record. Admittedly, I find that the petitioner’s registration under the said Act had been cancelled on the ground of non-filing of returns. It is not the case of the respondents that the petitioner had been adapting dubious process to evade tax. Taking note of the fact that the suspension/revocation of license would be counterproductive and works against the interest of the revenue since, the petitioner in such a case would not able to carry on his business in the sense that no invoice can be raised by the petitioner and ultimately would impact recovery of tax, I am of the view that the respondents should take a pragmatic view in the matter and permit the petitioner to carry on his business.
14. I find it is the contention of the respondents that the petitioner is not interested to comply with the provisions of the said Act, it is, however, noticed that immediately upon issuance of the show cause the petitioner had filed its returns. Such fact would corroborate from the print out taken from the portal of the respondents.
15. Although, it has been strenuously argued by Ms. Roychoudhury, that it was the obligation of the proper officer to take note of the returns filed by the petitioner, the fact that the petitioner remained unrepresented during the hearing cannot be ignored.
16. Be that as it may, for reasons noted hereinabove and having regard to the direction issued by the Hon’ble Division Bench of this Court in the case of Subhankar Golder v. Assistant Commissioner of State Tax, Serampore Charge & Ors. (MAT 639 of 2024) on 9th April, 2024, I propose to set aside the order dated 27th March, 2023, cancelling the registration of the petitioner under the said Act, subject to the condition that the petitioner files his returns for the entire period of default and pays requisite amount of tax, interest, fine and penalty, if not already paid.
17. It is made clear that if the petitioner complies with the directions/conditions noted above, within 4 weeks from the date of receipt of the server copy of this order, the petitioner’s registration under the said Act shall be restored by the Jurisdictional Officer/respondent no.1. However, if the petitioner fails to comply with the directions as aforesaid, the benefit of this order will not enure to the petitioner and the writ petition would stand automatically dismissed.
18. For the purpose of compliance of the above directions, the respondents are directed to activate the portal within one week from the date of communication of this order, so that the petitioner can file his returns, pays requisite amount of tax, interest, fine and penalty if not already paid.
19. As a sequel to the above, the order dated 11th May, 2023, rejecting the application for revocation of the order of cancellation and the order dated 26th February, 2024 passed by the appellate authority also stand set aside.
20. Since, no affidavit-in-opposition has been called for, the allegation made in the writ petition are deemed not to have been admitted by the respondents.
21. With the above direction and observations, the writ petition is disposed of without any order as to costs.
22. Urgent Photostat certified copy of this order, if applied for, be made available to the parties upon compliance of necessary formalities.
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