Case Law Details
Amirul Islam Vs The State of West Bengal & Ors. (Calcutta High Court)
The case of Amirul Islam Vs The State of West Bengal & Ors. in the Calcutta High Court revolves around the cancellation of GST registration under the West Bengal Goods and Services Tax Act, 2017 (WBGST Act). The petitioner, Amirul Islam, challenged the cancellation of his registration on grounds of procedural lapses and the exceptional circumstances caused by the COVID-19 pandemic.
1. Procedural Lapses in the Show-Cause Notice
Amirul Islam’s primary contention was that the show-cause notice issued on November 29, 2021, was invalid due to procedural irregularities. According to the petitioner, the notice combined provisions from Rule 21A(2A) and Rule 22(1) of the WBGST Rules, which should be issued separately using different forms (GST REG-31 and GST REG-17 respectively). This combination was argued to be against the statutory requirements, making the notice and subsequent cancellation of registration legally unsound.
2. Exceptional Circumstances Due to the COVID-19 Pandemic
Amirul Islam further argued that his inability to file returns for six consecutive months was due to severe health issues (colon cancer) and the economic impact of the COVID-19 pandemic on his resort business. He pointed out that the Supreme Court had acknowledged the pandemic’s impact by extending the application of the Limitation Act until February 28, 2022. Therefore, the petitioner claimed that his failure to comply with the filing requirements should be viewed with sympathy and leniency.
3. Legal Precedents and Alternative Remedies
The petitioner cited several judgments to support his case, including the decisions in Subhankar Golder vs. Assistant Commissioner of State Tax and M/s Euro PVC Fabric vs. Principal Commissioner of Goods and Services Tax. These cases highlighted the principle that procedural lapses in issuing notices could invalidate subsequent actions like cancellation of registration. Additionally, Amirul Islam argued that even though he had not exhausted alternative remedies like filing an appeal, the fundamental procedural errors justified direct intervention by the court.
4. Department’s Defense
The department argued that the cancellation was justified due to Amirul Islam’s non-compliance with return filing for six months, which empowered the officer to cancel the registration under Section 29 of the WBGST Act. They maintained that the notice, although in a combined form, effectively communicated the grounds for cancellation. The department also emphasized that the petitioner’s failure to respond to the show-cause notice further justified the cancellation.
5. Court’s Consideration
The Calcutta High Court considered three main issues:
- The validity of the show-cause notice.
- The maintainability of the writ petition despite the availability of alternative remedies.
- The potential benefits of revoking the cancellation for both the petitioner and the state.
The court noted that the procedural requirement to issue separate notices under different provisions was mandatory. Citing the principle from Nazir Ahmed vs. King Emperor, the court held that the procedural lapses rendered the notice invalid. Consequently, the cancellation based on such an invalid notice was also deemed illegal.
6. Impact of COVID-19 and Humanitarian Considerations
The court acknowledged the extraordinary circumstances posed by the pandemic, which had disrupted businesses and compliance capabilities. Given Amirul Islam’s health condition and the financial distress caused by the pandemic, the court found it justifiable to give sympathetic consideration to his case.
Conclusion
The Calcutta High Court ultimately set aside the cancellation of Amirul Islam’s GST registration, directing the department to restore his registration and allow him to file overdue returns. This decision underscored the importance of adhering to procedural norms and recognized the significant impact of the COVID-19 pandemic on compliance capabilities. The judgment highlights the judiciary’s role in balancing strict legal compliance with humanitarian considerations in extraordinary circumstances.
This case serves as a vital precedent for similar disputes under the GST regime, emphasizing the need for procedural correctness and the consideration of exceptional circumstances impacting compliance.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
Affidavit-of-service filed in Court today is taken on record.
The writ petitioner being aggrieved by the cancellation of his registration being no. 19AAYPI5879F2ZS under the West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the WBGST Act) has filed this writ petition. The petitioner says that only on the ground that he was unable to file the return for consecutive six months, the registration of the petitioner has been cancelled. The petitioner says that on 29th June, 2021 a show cause notice for cancellation of registration was issued to the petitioner. The petitioner says that this notice is in violation of the procedure laid down by the statute. The petitioner says that under Section 29(2)(C) of the WBGST Act the registration can be cancelled. In such a situation under sub-rule 2A of Rule 21A of the WBGST Rules, 2017 the department can issue a notice for suspension. The department can also issue notice under Rule 22(1) of WBGST Rules, 2017 but there cannot be a combined notice. Notice in Form GST REG-31 is issued under the provisions of Rule 21A (2A) of the 2017 Rules where as notice under Rule 22(1) of the said Rules is issued by Form GST REG-17. The notice dated 29th November, 2021 is a combined notice under Rule 22(1) and Rule 21A(2A) of the 2017 Rules. The department, therefore, has not followed the procedure laid down by the WBGST Act, 2017 and the rules framed thereunder. The petitioner also says that the show cause notice dated 29th November, 2021 is, therefore, bad in law. The petitioner says that on the basis of such an invalid notice the petitioner’s registration was cancelled by the department. The cancellation being on the strength of an invalid notice also suffers from patent illegality. The decision as to cancellation of the petitioner’s registration as a whole is, therefore, bad in law and should be set aside and/or quashed.
The petitioner says that the petitioner could not file the return for consecutive six months as he was suffering from colon cancer from the year 2020. The business which the petitioner operated as a registered entity is that of operating a resort. The petitioner also says that the pandemic during March, 2020 uptil 28th February, 2022 has caused jeopardy to the petitioner’s business and on an overall effect the default in filing of return took place for six months immediately prior to November, 2021. The petitioner has filed his return upto December, 2020 and as such the entire default took place during the pandemic. The petitioner says that considering the effect of pandemic, the Hon’ble Supreme Court has also excluded the application of Limitation Act till 28th February, 2022. The petitioner says that he intends to carry on business and come within the ambit of the WBGST Act. The petitioner thus prays for revocation of the cancellation and restoration of the registration so that the petitioner can file the current return as also with the leave of Court the return for the defaulted period.
The petitioner has relied upon a judgment passed in MAT 639 of 2024 (Subhankar Golder Vs. Assistant Commissioner of State Tax, Serampore Charge & Ors.) delivered by the Division Bench presided by the Hon’ble the Chief Justice on 9th April, 2024. The petitioner has also relied upon a Coordinate Bench decision passed on 29th April, 2024 in WPA 460 of 2024 (Rana Chowdhury Vs. The State of West Bengal & Ors.) following Subhankar (supra). The petitioner also cited a judgment of a Division Bench of the Delhi High Court passed on 27th February, 2024 in W.P.(C) 349 of 2024 (M/s Euro PVC Fabric Vs. Principal Commissioner of Goods and Services Tax, South Delhi).
On behalf of the department it is submitted that there was no mistake on the part of the department in cancelling the petitioner’s registration. The petitioner did not file return for consecutive six months which empowers the Officer to form an opinion as to whether the registration is to be suspended or cancelled under the provision of Section 29 of the WBGST Act. The concerned officer felt that the registration should be cancelled without first suspending the same and as such issued the notice dated 29th November, 2021. The said notice was issued in a printed format wherein FORM GST REG-17/31 was stated. The contents of the notice will, however, show that the same is under Rule 22(1) of the 2017 Rules.
After hearing the parties and considering the materials on record, I find that three issues are raised for consideration:-
1. Whether the show-cause notice dated 29th November, 2021 is bad in law;
2. Whether alternative remedy, since the order of cancellation of the registration is an appealable order bars the filing of writ petition if so whether the writ petition is maintainable;
3. Whether the revocation of the cancellation and restoration of the registration will anyway be beneficial to the State as money collected from the petitioner can be utilized for the development of the State coupled with the fact that the continuing of the cancellation order petitioner will deprive the petitioner of his livelihood.
The notice dated 29th November, 2021 has been issued in a mechanical manner without considering the procedure laid down under the law. GST REG-31 and GST REG-17 are issued under different provisions of WBGST Act and Rules and is based on different circumstances. A notice in GST REG-17 cannot be equated with a notice GST REG-31. It is well-settled principle as laid in Nazir Ahmed Vs. King Emperor reported in AIR 1936 Privy Council 253 that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all other methods of performance are necessarily forbidden. The authority concerned under the WBGST Act, 2017 and the Rules framed thereunder is authorized to issue show-cause for suspension as also to terminate the registration. The procedure spelt out under the 2017 Act and Rules framed thereunder have a mandatory flavour and are required to be followed in that particular manner only. The show-cause notice dated 29th November, 2021 being a combination of two separate provisions is, therefore, bad in law. Once the same is held to be bad in law, replying to the same or failing to reply to the same becomes inconsequential as the department has put up a defence that the petitioner failed to reply to the show-cause notice.
The judgment relied upon by the petitioner in Subhankar Golder (supra) has a little factual difference from the case in hand. In Subhankar Golder (supra) the writ petitioner had preferred an appeal challenging the cancellation which on being rejected prompted the petitioner therein to approach this Court. In the instant case, the petitioner has not preferred any appeal. This allows the revenue to raise the point of alternative remedy for which the writ petition is not maintainable.
This argument on behalf of the revenue can be answered in two ways. Firstly, if the show-cause notice is bad in law, then the exercise of jurisdiction by the officer authorized under the 2017 Act and the rules framed thereunder amounts to exceeding his jurisdiction. The show-cause notice and the action of the Officer so empowered in that case can be challenged in writ jurisdiction without filing an appeal as the Appellate Authority under the statutory appeal is not empowered to decide on the validity of the notice as raised in this case. Secondly, in the case before the Delhi High Court, there was no appeal, yet the Division Bench of the Delhi High Court allowed the writ petition by cancelling the revocation and restoring the registration number.
It is also correct that during March, 2020 and 28th February, 2022, the situation in the country owing to pandemic was not normal. The business entities have suffered commercial loss during this period for lack of business, at the same time filing of the returns have become irregular owing to prevailing condition at the relevant point of time. The petitioner’s default took place during the pandemic and, as such, a sympathetic consideration is required to be given keeping in mind that by retaining the order of cancellation, the petitioner will be deprived of carrying on his business which will ultimately result into the loss to the Government exchequer.
Considering all these aspects, I find that justice will be sub-served, if, I direct the order impugned dated 25th January, 2022 be set aside particularly when the default in filing the return for six consecutive months being the only ground for cancellation. The order dated 25th January, 2022 cancelling the petitioner’s registration is set aside and the registration is restored back to its original position. The department is directed to permit the petitioner to file the return for the period from December, 2020 till date. If the petitioner fails to file the return within a period of three weeks from date, the restoration of the registration will be again automatically cancelled.
The petitioner is directed to file the return from this date on a regular basis complying with the provisions of law. The petitioner shall be liable to pay the tax, interest, late fees and applicable penalty, if any, under the relevant statute.
Nothing further remains to be adjudicated in the writ petition and the same is accordingly is disposed of.
Urgent Photostat certified copy of this order, if applied for be supplied to the parties upon compliance of necessary formalities.
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