Case Law Details
Sarla Enterprises Vs Commissioner of SGST Delhi & Anr. (Delhi High Court)
The Delhi High Court considered a challenge to an order dated 27 December 2024 whereby the petitioner’s GST registration was cancelled under Rule 22. The cancellation was based on the petitioner’s failure to file returns within the prescribed time under the GST law.
The petitioner contended that although the show cause notice dated 5 November 2024 referred to non-filing of returns for a continuous period of six months preceding the notice and suspended the registration with effect from 5 November 2024, it did not indicate that the registration could be cancelled retrospectively. However, the impugned order cancelled the registration with retrospective effect from 1 April 2020.
The petitioner submitted that he was willing to file all pending returns and continue filing regular returns in future. It was also stated that the delay in filing returns occurred because the petitioner was suffering from cancer, and medical documents were produced in support of this contention.
The respondents opposed the petition, arguing that an alternative remedy was available and that the petition had been filed belatedly. It was further submitted that the medical records did not relate to the period during which the returns remained unfiled and that the cancellation order was justified.
After considering the rival submissions, the Court observed that the show cause notice only referred to cancellation of registration and recorded suspension of registration from 5 November 2024. The notice did not mention any proposal to cancel the registration with retrospective effect. In contrast, the impugned order cancelled the registration retrospectively from 1 April 2020.
The Court accepted the petitioner’s statement that all pending returns, including those for earlier periods, would be filed within four weeks and that regular returns would continue to be filed thereafter. This statement was accepted as an undertaking to the Court.
Taking into account the undertaking, the petitioner’s serious health condition, and the fact that the impugned order went beyond the scope of the show cause notice by imposing retrospective cancellation without prior notice, the Court held that the petition deserved to be allowed. Accordingly, the order dated 27 December 2024 was quashed and set aside.
The Court clarified that if the petitioner failed to comply with the undertaking regarding filing of pending returns, the authorities would be at liberty to proceed with cancellation of the GST registration.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The challenge is to the impugned order dated 27th December, 2024, wherein the GST registration of the petitioner, pursuant to the provisions of Rule 22, came to be cancelled.
2. The failure of the petitioner, as could be inferred from the impugned order, is to file the timely returns under the GST Act.
3. It is the contention of the counsel for the petitioner that the registration is cancelled with retrospective effect, i.e., from 01st April 2020.
4. According to her, the show-cause notice dated 05th November, 2024, issued in the Form GST REG-17/31, whereby the registration was suspended w.e.f. 05th November, 2024, does not speak of any cause to the extent that the registration shall be cancelled with retrospective effect.
5. According to the learned counsel, the show-cause notice speaks of the returns, not being filed for a continuous period of the last six months preceding the date of the show-cause notice.
6. As such, it is urged that not only the petitioner undertakes to file the pending returns but also shall file the regular returns.
7. It is urged that there is a failure on the part of the petitioner to file the timely returns as he is suffering from cancer, as would be inferred from the health-related documents which are issued by the medical institutions.
8. As against above, counsel for the respondent states that not only an alternate remedy is available to the petitioner, but also the petition is preferred at a belated stage.
9. It is the contention of the counsel for the respondent that medical reports are not of the period for which the returns were not filed.
10. According to the counsel for the respondent, the order in such an eventuality is quite justified.
11. Having considered the rival claims, it is expressly clear that the show-cause notice speaks only of cancellation of registration and it further notes that the registration stood suspended from 05th November, 2024.
12. As far as the show-cause notice is concerned, it nowhere speaks of the cancellation of the registration with retrospective effect.
13. The order impugned in categorical terms demonstrates that the registrations stood cancelled w.e.f. 01st April, 2020, i.e., with the retrospective effect.
14. We accept the statement made by the counsel for the petitioner that in case the petitioner is allowed, he shall furnish the entire returns, even of the earlier period, within a period of four weeks from today.
15. The said statement is accepted as an undertaking to this Court.
16. It is further assured that the petitioner shall file regular returns in the matter.
17. Having regard to the aforesaid undertaking and the fact that the impugned order travels beyond the show-cause notice, and also having regard to the serious health ailment of the petitioner, we deem it appropriate to allow the petition.
18. The impugned order is hereby quashed and set aside.
19. We accept the statement in the form of an undertaking to this Court as regards the pending returns to be filed within stipulated period.
20. We make it clear that if there is any default on the part of the petitioner, it shall be open for the respondent to forthwith proceed with the cancellation of the GST registration.
Author Bio
