Vemuri Kaveri Travels Vs Superintendent of Central Tax (Telangana High Court)
Summary: The Telangana High Court, in Vemuri Kaveri Travels Vs Superintendent of Central Tax, set aside the cancellation of GST registration of a passenger transport business and the subsequent appellate order, directing the original authority to reconsider the matter after providing the taxpayer an opportunity of hearing. A Division Bench comprising Chief Justice Ujjal Bhuyan and Justice C.V. Bhaskar Reddy observed that cancellation of GST registration under Section 29 of the CGST Act could adversely affect the petitioner’s business operations. Considering the circumstances and an earlier decision of the same High Court, the Bench held that the interests of justice required fresh consideration by the Superintendent of Central Tax. Importantly, the Court did not order unconditional restoration of registration or extinguish outstanding tax liabilities. The matter was remanded, with a direction that the petitioner submit all required GST returns and that the competent authority pass a fresh order in accordance with law.
The petitioner was a partnership firm engaged in transporting passengers through buses owned by it. The Department issued a show-cause notice dated 19 March 2020 alleging that the firm had failed to file GST returns continuously for six months. The petitioner was required to respond within seven working days and indicate whether it sought a personal hearing. It submitted a reply dated 29 March 2020, but the Superintendent of Central Tax rejected its explanation and cancelled its GST registration by order dated 29 July 2020. The Department invoked Section 29(2) of the CGST Act and clarified that cancellation did not extinguish the firm’s continuing GST liabilities. The petitioner challenged the cancellation before the Joint Commissioner (Appeals-II), but the appeal was rejected on 26 August 2022.
The appellate authority recorded that the petitioner had continued business activities while failing to file returns by their due dates. It also questioned the eligibility of input tax credit utilised during April 2019 to November 2019 and considered that the relevant Range Officer should verify the credit and take appropriate action. The petitioner submitted that it had paid IGST in Karnataka and Andhra Pradesh during certain periods and that e-commerce operators had been collecting and paying tax on its behalf from January 2022. The appellate authority was not satisfied with the explanations and considered the request for revocation of cancellation to be lacking in genuineness. These were findings and allegations recorded by the appellate authority, not independent findings of tax evasion made by the High Court.
Before the High Court, the petitioner pointed out that, at the relevant time, the GST Appellate Tribunal contemplated under Section 112 of the CGST Act had not been constituted, and therefore a further statutory appeal before that forum was unavailable. The Division Bench examined both the cancellation order and the appellate order. It also considered its earlier decision dated 27 June 2022 in M/s. Chenna Krishna Charyulu Karampudi Vs Additional Commissioner (Appeals), W.P. No. 27071 of 2022. Taking into account the adverse impact of registration cancellation on the petitioner’s ability to operate its passenger transport business, the Court concluded that the dispute should be reconsidered by the original authority.
Accordingly, the Court set aside the appellate order dated 26 August 2022 as well as the original cancellation order dated 29 July 2020 and remanded the case to the first respondent. The Superintendent of Central Tax was directed to provide a due opportunity of hearing and pass a fresh order in accordance with law. The petitioner was specifically required to submit all returns prescribed by the statute while the matter was reconsidered. The writ petition was disposed of without costs. The ruling illustrates the importance of procedural fairness and meaningful reconsideration in GST registration cancellation and revocation proceedings, particularly where continued cancellation may substantially restrict business operations. The decision is confined to setting aside the impugned orders and directing fresh adjudication; it does not finally determine the eligibility of the disputed ITC or the petitioner’s tax liabilities.
Cases Discussed
1. M/s. Chenna Krishna Charyulu Karampudi Vs Additional Commissioner (Appeals) (Telangana High Court); W.P. No. 27071 of 2022; 27/06/2022 — The earlier decision expressly considered by the Division Bench while deciding whether the GST registration cancellation dispute should be remanded for fresh examination. The present judgment refers to that order without reproducing its reasoning or operative directions.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
Heard Mr. S.Suri Babu, learned counsel for the petitioner and Ms. Swapna Reddy, learned counsel representing Mr. B.Narsimha Sarma, learned counsel for the respondents.
2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of the following orders:
(i) Order dated 29.07.2020 issued by respondent No.1 cancelling Goods and Services Tax (GST) registration of the petitioner.
(ii) Order dated 26.08.2022 passed by respondent No.2 as the appellate authority rejecting the appeal filed by the petitioner against cancellation of GST Registration.
3. Petitioner is a partnership firm engaged in the business of transporting passengers from one place to another through the buses owned by it. Petitioner is registered under the Central Goods and Services Tax Act, 2007 (briefly ‘the CGST Act’ hereinafter) as well as under the Telangana State Goods and Services Tax Act, 2007 (briefly ‘the TSGST Act’ hereinafter).
4. On 19.03.2020, respondent No.1 issued show cause notice to the petitioner informing the petitioner that it had not filed returns for a continuous period of six months and therefore its registration is liable to be cancelled. Petitioner was called upon to file a reply within seven working days and also to inform whether personal hearing was required or not.
5. It appears that in response to the show cause notice dated 19.03.2020, petitioner had submitted a reply dated 29.03.2020. However, respondent No.1 declined to accept the reply of the petitioner and opined that petitioner’s registration was liable to be cancelled in terms Section 29(2) of the CGST Act for failure to file GST returns for a period of six months, clarifying that such cancellation would not affect the GST liability of the petitioner. Accordingly, he passed the order dated 29.07.2020.
6. Aggrieved by such cancellation of registration, petitioner preferred appeal before respondent No.2. However, by the order in appeal dated 26.08.2022, appeal of the petitioner was rejected. It has been held as under:
I have gone through the submissions made by the appellant in their appeal memorandum. In the instant case, the appeal was filed seeking to set aside the impugned order canceling registration of the appellant by the OA. From the documents submitted by the appellant, I find that the OA cancelled the registration with effect from 29.07.2020. The appellants have submitted that they have filed returns till cancellation of registration i.e., July, 2020. They submitted that they will file returns after revocation of cancellation of GST registration up to date and discharge the GST liability, if any.
Further, the appellant have submitted the tax liability statement and taxes paid by them. It is seen from the said statements that they were continuously in business and not filing the returns by the due dates. Further, for the period from April 2019 to November 2019, they have utilized the input tax credit which appears to be not eligible and the eligibility of the said input tax credit has to be verified by the Range Officer and take appropriate action in the matter.
Further, for the period from April 2020 to August 2020 and September, 2020 to till date, they have submitted that they have paid IGST in Karnataka and Andhra Pradesh. Further, they added that from January 2022, e-commerce operators are collecting taxes and paying the same to the Government on their behalf. As per Section 29(3) of the CGST Act though the registration was cancelled, it does not absolve the tax payer to discharge the tax liability.
Show cause notice for cancellation of registration was issued on 19.03.2020 and the order of cancellation of registration was issued on 29.07.2020. Even though the appellant was doing business and collecting the taxes, they did not bother to file the returns and discharge their tax liability inspite of issuance of show cause notice for cancellation of registration with an intention to evade payment of taxes.
In the light of the above discussions, it appears that the request of the appellant to set aside the impugned order appears to be not genuine. Thus, I am of the considered view that the request of the appellant for revocation of the Cancellation of Registration does merits consideration.
7. Learned counsel for the petitioner submits that till date, no GST Tribunal has been constituted under Section 112 of the CGST Act. Therefore, question of filing appeal before such Tribunal does not arise.
8. We have perused the order dated 29.07.2020 as well as the order in appeal dated 26.08.2022. We have also considered the order passed by this Court on 27.06.2022 in W.P.No.27071 of 2022 (M/s. Chenna Krishna Charyulu Karampudi v. Additional Commissioner (Appeals)).
9. Upon due consideration, we are of the view that it would be in the interest of justice to remand the matter back to respondent No.1 to reconsider the entire matter regarding cancellation of registration as cancellation of GST registration would have an adverse impact on the petitioner restraining him from carrying on his business activities.
10. We therefore set aside the appellate order dated 26.08.2022 as well as the original order dated 29.07.2020 and remand the matter back to respondent No.1 to reconsider the cancellation of GST registration of the petitioner. Petitioner shall be given due opportunity of hearing by respondent No.1 whereafter fresh order shall be passed in accordance with law. Needless to say, while the matter is heard afresh by respondent No.1 on remand, petitioner shall submit all the returns as per the statute.
11. Writ Petition is accordingly disposed of. No costs.
As a sequel, miscellaneous petitions, pending if any, stand closed.
