Demise of father-in-law: Madras HC Revokes GST Registration Cancellation

Creatxia Vs State of Tamil Nadu (Madras High Court)

In a significant ruling, the Madras High Court has directed the revocation of the GST registration cancellation order issued by the State of Tamil Nadu. The decision comes after a writ petition was filed challenging the cancellation of the petitioner’s GST registration. The petitioner, Creatxia, had failed to file GST returns for a period of six months due to the unfortunate demise of her father-in-law, which led to her absence from business operations.

The case, Creatxia Vs State of Tamil Nadu, was heard by the Madras High Court, with the petitioner’s counsel arguing that the cancellation was a result of genuine circumstances. The petitioner had been unable to comply with GST filing requirements due to the sudden death in her family, which demanded her presence for the last rites. As a result, the business operations were impacted, and she failed to file the necessary returns within the prescribed timeline.

On hearing the petitioner’s argument, the Madras High Court expressed its understanding of the situation and observed that the reason provided for the non-compliance appeared to be reasonable. As a result, the Court decided to revoke the cancellation order passed by the respondent on 16th November 2023, subject to the fulfillment of certain conditions.

The conditions imposed by the Court include the following:

1. Restoration of GST Registration: The respondent is instructed to direct the GST Network, New Delhi, to make necessary changes in the GST portal architecture to allow the petitioner to file pending returns and pay any taxes, penalties, and fines. This must be completed within four weeks.
2. Filing of Pending Returns: The petitioner is required to file all outstanding GST returns, along with the applicable taxes, interest, and fees for delayed filing, within four weeks of the GST registration restoration.
3. Restriction on ITC Usage: The Court clarified that any unutilized Input Tax Credit (ITC) cannot be used for paying taxes until it is properly scrutinized and approved by an appropriate officer.
4. Approval for ITC Utilization: Any ITC earned will also require approval before it can be used to discharge future tax liabilities.
5. Automatic Cessation of Relief: The relief granted by the Court will be automatically withdrawn if the petitioner fails to comply with any of the above conditions.

With these directions, the Madras High Court disposed of the writ petition, emphasizing that the cancellation of GST registration would be revoked under the condition of compliance with tax liabilities. The case serves as an important precedent for businesses facing similar challenges of non-compliance due to personal or unforeseen circumstances.

In conclusion, while the Court recognized the genuine reasons behind the delay in filing GST returns, it stressed that the conditions outlined must be fulfilled to restore the GST registration. The decision balances the need for compliance with the understanding of personal hardships, offering a pathway for businesses to reinstate their registration under regulated terms.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This writ petition has been filed challenging impugned order dated 16.11.2023 passed by the respondent.

2. Amirta Poonkodi Dinakaran, learned Government Advocate, takes notice on behalf of the respondent. By consent of the parties, the main writ petition is taken up for disposal at the admission stage itself.

3. The learned counsel for the petitioner would submit that due to the demise of the petitioner’s father-in-law, she was forced to stay in Sri 2/7 ka for performing the last rites, due to which, the petitioner had not the GST returns for a period of 6 months. Under these circumstances, the GST Registration of the petitioner was cancelled by the respondent vide order dated 16.11.2023.

4. Further, he would submit that the petitioner is willing to file his GST returns and pay the entire tax liabilities along with applicable interest and penalty, if any. Hence, he requests this Court to revoke the order passed by the respondent for cancellation of GST Registration of the petitioner.

5. In reply, the learned Government Advocate for the respondent confirms that the GST registration of the petitioner was cancelled by the respondent vide impugned order dated 16.11.2023 and requests this Court to pass an appropriate order.

6. Heard the learned counsel for the petitioner and the learned Government Advocate for the respondent and also perused the materials available on record.

7. In this case, the GST registration of the petitioner was cancelled by the respondent vide the impugned order dated 16.11.2023. According to the petitioner, due to the demise of her father-in-law, she was unable to run his business and hence, she had failed to file his returns continuously for a period of 6 months. The reason provided for non­compliance with the relevant provisions of the Act within the prescribed time, in the considered opinion of this Court, appears to be genuine.

8. In view of the above, this Court is inclined to revoke the impugned order passed by the respondent canceling the GST registration of the petitioner. The cancellation of registration is hereby revoked, subject to the fulfillment of the following conditions:

(i) The respondent shall take suitable steps by instructing GST Network, New Delhi to make suitable changes in the architecture of the GST Web portal to allow the petitioner to file the returns and to pay the tax/penalty/fine, within a period of four weeks therefrom.

(ii) The petitioner is directed to file returns for the period till date, if not filed, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of 4 weeks from the date of restoration of GST Registration of the petitioner.

(iii) It is made clear that such payment of tax, interest, fine/fee etc. shall not be allowed to be made or adjusted from and out of any Input Tax Credit (ITC) which may be lying unutilized or unclaimed in the hands of the petitioner.

(iv) If any ITC has remained unutilized, it shall not be utilised until it is scrutinized and approved by an appropriate or competent officer of the Department.

(v) Only such approved ITC shall be allowed to be utilized thereafter for discharging future tax liability under the Act and Rules.

(vi) If any ITC was earned, it shall be allowed to be utilised only after scrutinising and approving by the respondent or any other competent authority.

(vii) If any of the aforesaid conditions is not complied with by the petitioner, the benefit granted under this order will automatically ceased to operate.

9. With the above directions, this writ petition is disposed of. No cost. Consequently, the connected miscellaneous petitions are also closed.