GST registration cancelled due to non-filing of returns to be restored on filing of returns along with the tax and penalty

Immanuvel Dharmaraja Store Vs Appellate Deputy Commissioner (GST) (Madras High Court)

GST registration cancelled due to non-filing of returns to be restored on filing of returns along with the tax and penalty

The Hon’ble Madras High Court in M/s Immanuvel Dharmaraja Store v. Appellate Deputy Commissioner (GST) [W.P. (MD) No. 23179 of 2022 dated October 10, 2022] has held that, GST registration shall be revived, in case where the GST Registration of the assessee was cancelled due to non-filing of returns for a long period and later on the assessee had paid the tax and the penalty.

Facts:

M/s Immanuvel Dharmaraja Store (“the Petitioner”) failed to file the monthly returns for the period from June 2019 to August 2021. Therefore, a Show Cause Notice (“SCN”) dated May 24, 2019 was issued by the Assistant Commissioner seeking explanation for non-filing of the returns. Thereafter, the registration of the Petitioner was cancelled in view of Section 29 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) on September 5, 2019 with effect from March 31,2018.

Subsequently, the Petitioner paid dues from June 2019 to August 2021 including the tax amount and penalty and further, submitted that he was unable to pay tax from September 2021, till the registration was cancelled. The Petitioner filed an appeal before the Appellate Deputy Commissioner (“the Respondent”) which was rejected on the ground of limitation.

Hence, this petition had been filed.

Issue:

Whether the Petitioner is entitled to restore its registration on the ground that the tax is paid with penalty?

Held:

The Hon’ble Madras High Court in W.P. (MD) No. 23179 of 2022 held as under:

• Relied on its earlier judgment in Suguna Cutpiece v. Appellate Deputy Commissioner (ST) (GST) and others (W.P.Nos. 25048, 25877, 12738 of 2021 & Ors., dated January 31, 2022) wherein it was held that, where registration of assessee was cancelled due to non-filing of returns for a long period and later on the assessee paid tax and penalty, its registration shall be revived.
• Held that, the benefit extended by the Court in its earlier orders may be extended to the Petitioner and the registration of the Petitioner shall be revived.

Relevant Provisions:

Section 29 of the CGST Act:

“Cancellation or suspension of registration.

(1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where––

(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25:

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where––

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or

(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.

(3) The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.

(4) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.

(5) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed:

Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.

(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed.”

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This Writ Petition has been filed challenging the order of cancellation of the Registration Certificate on the premise that the Petitioner has failed to file Goods and Services Tax monthly returns. Consequently, the Registration Certificate was cancelled with effect from 31.03.2018 in view of Section 29 of the Central Goods and Services Tax Act, 2017.

2. It is submitted by the learned counsel for the Petitioner that the Petitioner is the Proprietor of M/s. Immanuvel Dharamaraja Store. The Petitioner failed to file the monthly returns for the period from June 2019 to August 2021. Further, a show cause notice dated 24.05.2019 was issued by the 2^nd Respondent seeking explanation for non-filing of the returns. Subsequently, the Petitioner have paid dues from June 2019 to August 2021 including the tax amount and penalty. He further submitted that he was unable to pay tax from September 2021, till the registration was cancelled on 05.09.2019 with effect from 31.03.2018. As against the said order of cancellation, he preferred an appeal before the appellate authority. The appellate authority has rejected the appeal vide order dated 05.10.2021 on the ground that it was beyond the period of limitation.

3. 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.”

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) 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.

4. 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.

5. 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.

6. This Writ Petition is ordered on the same terms mentioned in paragraph 229 of the order of Suguna Cutpiece Centre (cited supra). No costs.

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