HC Restores GST Registration with Return Filing & Tax Payment Conditions

Rana Chowdhury Vs State of West Bengal & Ors. (Calcutta High Court)

In the case of Rana Chowdhury vs. State of West Bengal & Ors., heard in the Calcutta High Court, the petitioner challenged the cancellation of their GST registration under the provisions of the WBGST Act, 2017. The cancellation was based on the petitioner’s failure to file returns for a continuous period of six months.

The petitioner’s counsel argued that the petitioner was willing to comply with the provisions of the Act and had not been able to communicate this to the authorities due to a failure to reply to the show cause notice. It was emphasized that the petitioner was prepared to file the necessary returns.

Reference was made to a judgment of the Division Bench of the Court in the case of Subhankar Golder vs. Assistant Commissioner of State Tax, where in similar circumstances, the cancellation of registration was set aside, subject to the condition that the petitioner filed returns for the entire period of default and paid the requisite amount of tax, interest, fines, and penalties.

On the other hand, the State argued that the petitioner had not complied with the statutory provisions, and thus, the cancellation of registration was justified.

The Court considered the facts and arguments presented. It noted that the cancellation was due to non-filing of returns and that there was no indication of the petitioner attempting to evade taxes through dubious means. The Court also recognized that suspending or revoking the registration could be counterproductive to revenue collection, as it would hinder the petitioner’s ability to conduct business and issue invoices, thereby affecting tax recovery.

Considering these factors, the Court decided to take a pragmatic view and allow the petitioner to continue their business. However, it stressed the importance of the petitioner filing returns to determine the final tax liability.

In line with the direction issued in the Subhankar Golder case, the Court set aside the order cancelling the petitioner’s registration, subject to the condition that the petitioner filed returns for the entire default period and paid the requisite tax, interest, fines, and penalties.

The Court specified that if the petitioner complied with these conditions within four weeks from the receipt of the order, their registration would be restored. However, failure to comply would result in the dismissal of the petition.

To facilitate compliance, the respondents were directed to open the portal within one week, allowing the petitioner to file returns and make necessary payments.

Ultimately, the writ application was disposed of without any order as to costs, with all parties instructed to act based on the server copy of the order from the Court’s official website.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. The present writ application has been filed, inter alia, challenging the order of cancellation of registration of the petitioner under the WBGST Act, 2017¹.

2. It is the petitioner’s case that on or about 26t^h November 2021 the petitioner was served with a notice of show cause as to why the registration of the petitioner under the said Act shall not be cancelled for the petitioner having failed to file his returns for a continuous period of six months.

3. Ray, learned advocate appearing for the petitioner submits that the petitioner was and is all along interested to comply with the provisions of the said Act by filing his returns. Unfortunately, such fact could not be brought to the notice of the respondents, as no reply to the show cause was filed. He submits that the petitioner is ready and willing to comply with the provisions of the said Act.

4. By placing reliance on a judgment of the Hon’ble Division Bench of this Court delivered in the case of Subhakar Golder versus Assistant Commissioner of State Tax, Serampore Charge (MAT 639 of 2024) on 9th April 2024, it is submitted that in similar circumstances, similar order of cancellation of registration has been set aside, subject to the condition that the petitioner files returns for the entire period of default, pays requisite amount of tax and interest and fine and penalty. He submits that his Court may be pleased to set aside the order of cancellation and allow the petitioner to file his returns.

5. Mr. Saha, learned advocate appearing for the State on the other hand submits that the petitioner had not complied with the statutory provisions and it is for such reason, the registration of the petitioner under the said Act was cancelled.

6. According the respondent authorities the petitioner was given opportunity to show cause. Since, no reply to the show cause was given by the petitioner, the authorities had cancelled the registration. There is no irregularity on the part of the authorities in cancelling the registration.

7. Heard the learned advocates appearing for the respective parties and considered the materials on record.

8. Admittedly, I find that the registration of the petitioner had been cancelled on the ground of non-filing of returns. It is not the case of the respondents that the petitioner had been adopting 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.

9. I find from the submissions made by the respondents that unless, the petitioner files his returns, the respondents cannot determine the final liability.

10. Having regard to the aforesaid and taking note of the direction issued by the Hon’ble Division Bench of this Court in the case of Subhankar Golder (Supra), I propose to set aside the order dated 4t^h February 2022 cancelling the registration of the petitioner subject to the condition that the petitioner files his returns for the entire period of default and pays requisite amount of tax and interest and fine and penalty.

11. 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. 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.

12. For the purpose of compliance of the above directions, the respondents are directed to open the portal within one week from date, so that the petitioner can file his returns, pays requisite amount of tax and interest and fine and penalty.

13. With the above direction and observations, the writ application being WPA 460 of 2024 is disposed of without any order as to costs.

14. All parties to act on the basis of the server copy of this order duly downloaded from this Hon’ble Court’s official website.

¹ Hereinafter referred to as the “said Act”