Case Law Details
NMH Design Build Vs Commercial Tax Officer (Madras High Court)
The Madras High Court, in the case of NMH Design Build Vs Commercial Tax Officer, set aside the cancellation of a Goods and Services Tax (GST) registration despite the petitioner’s failure to file returns, respond to the show cause notice, or utilize statutory remedies like the Amnesty Scheme or an application for revocation under Section 30 of the Central Goods and Services Tax (CGST) Act, 2017.
The petitioner admitted that they had not conducted any business and consequently did not file returns, which led to the issuance of a show cause notice on January 25, 2025, and the subsequent cancellation of their GST registration. The Revenue argued that the petitioner failed to avail themselves of the Amnesty Scheme, which was in force until June 30, 2023, and also neglected to use the appeal provision under Section 107 of the CGST Act. The department also expressed uncertainty regarding whether the petitioner had conducted any undeclared transactions during the non-filing period.
The High Court considered the issue of GST registration cancellation in light of its previous ruling in Suguna Cut Piece Centre Vs. Appellate Deputy Commissioner. In that judicial precedent, the Court had established that keeping dealers or assessees outside the GST framework served no beneficial purpose, as they were likely to continue their business operations regardless. The Court reasoned that denying an opportunity to revoke the cancellation or file an appeal would be a “defeating move,” potentially causing the Revenue to lose tax revenue by excluding the dealer from the formal tax scheme.
Following this principle, the Madras High Court decided to set aside the impugned cancellation order. It directed the respondent to revive the petitioner’s GST registration. However, to safeguard the revenue’s interest and prevent the potential misuse of tax credits accumulated during the period of default, the court imposed a crucial condition: the petitioner shall be subject to a six-month moratorium on the use of Input Tax Credit (ITC) and the Electronic Credit Ledger (ECRL). During this moratorium period, the petitioner is mandated to discharge all tax liabilities exclusively from amounts credited to the Electronic Cash Ledger, effectively freezing the Electronic Credit Ledger for six months from the date of revival. This balanced order allows the petitioner to rejoin the tax framework while ensuring revenue protection.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COUR
Mrs. K. Vasanthamala, learned Government Advocate takes notice on behalf of the respondent.
2. This Writ Petition is being disposed at the time of admission after hearing the learned counsel for the petitioner and the learned Government Advocate for the respondent.
3. The learned counsel for the petitioner would submit that the petitioner had no business and no returns were filed by the petitioner.
4. The impugned order precedes a Show Cause Notice dated 25.01.2025 to which, the petitioner has also not filed any reply
5. The learned counsel for the petitioner would submit that the petitioner had no business and no returns were filed by the petitioner.
6. It is submitted that the petitioner’s failed to file a regular return and therefore, unaware of the proceedings initiated on 25.01.2025, GST registration was cancelled. It is further submitted that no prejudice or harm will be caused to the respondent, if the cancellation of petitioner’s GST registration is revoked.
7. The learned Government Advocate for the respondent on the other hand would submit that there was an Amnetsy Scheme in force with effect from 31.03.2023 up to 30.06.2023 vide Notification No.3/23-Central Tax (CT). AsThe learned counsel for the petitioner would submit that the petitioner had no business and no returns were filed by the petitioner.
8. The petitioner has failed to take the benefit of the aforesaid Amnesty Scheme.
9. That apart, it is submitted that the petitioner has also failed to file an application under Section 30 of the Central Goods and Services Tax (CGST) Act, 2017 for revocation of the cancellation or file an appeal before the Appellate Authority in terms of Section 107 of the CGST Act, 2017 as made applicable to the petitioner. Hence, it is submitted that the writ petition is liable to be dismissed.
10. The learned Government Advocate for the respondent on instructions would submit that the Department is unaware as to whether there are any transactions made by the petitioner during the period when returns were not filed by the petitioner and therefore submits that on this count also this writ petition is liable to be dismissed.
11. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Government Advocate for the respondent.
12. The issue arising out the cancellation of registration was considered in detail by this Court in Suguna Cut Piece Centre Vs. Appellate Deputy Commissioner (2022) 99 GSTR 386, wherein, this Court had concluded that no useful purpose will be served by keeping the dealers/assessees outside the bounds of GST Act as they will continue to carry on the business.
13. The denial of an opportunity either file an appeal or to revoke the cancellation of registration was held to be a defeating move as the dealer/assessee will still continue to do business and if they are not brought into the mere scheme, the revenue will be the looser.
14. Considering the above, this Court is inclined to set aside the impugned order by directing the respondent to revive the GST registration of which, the petitioner may have failed to pay during the period, no returns were filed. There shall however be moratorium for a period of six months on the petitioner from discharging any part of tax liability from its Input Tax Credit (ITC) and from its Electronic Credit Ledger. The petitioner shall discharge its tax liability only out of the amounts it may credit in its Electronic Credit Ledger. In other words, the Electronic Credit Ledger shall be frozen for a period of six months from the date of revival of its registration.
15. With the above liberty, this Writ Petition stands allowed. No costs. Consequently, connected Writ Miscellaneous Petition is closed.
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