2022 (2) TMI 944 - HC - GST

Cancellation of registrations of petitioner - Non-payment of GST dues alongwith interest and penalty - security services to the outlets of the AIRCEL under a contract agreement - failure to pay the dues on the ground that AIRCEL itself were out of business, a huge amount of payment is due to the petitioner, and there is big loss in business - HELD THAT - The petitioner firm express their willingness to pay the defaulted tax amount plus the interest and the penalty as may be assessed by the department but because of the precarious financial condition they are unable to pay it in one go and therefore, makes a request that the petitioner be allowed to make the necessary payments in 48 (forty eight) installments. A reading of paragraph 5 of the Circular dated 28.02.2015 would make it discernable that the Commissioner of GST is empowered and has the discretion of granting sanction to pay arrear of the GST in installments upto maximum of 24 (twenty four) monthly installments and the Chief Commissioners are given the jurisdiction and authority to sanction the payment of the arrears in monthly installments greater than 24 (twenty four) upto a maximum of 36 (thirty six) - the petitioner firm in this writ petition claims that as because the precarious financial condition it would not be possible for them to pay the entire amount due plus the interest and penalty within 36 (thirty six) installments, which is the maximum limit for the Chief commissioner and therefore, seeks to invoke the discretionary power of the Court in allowing them to pay the dues in 48 (forty eight) installments. Without taking any specific view and in order to provide some succor to the petitioner firm so that they can remain in the business they are presently undertaking, it is provided that the amount of ₹ 2,58,30,801/- plus the interest and the penalty that may be applicable under the law be evaluated by the department and the assessed amount be determined. The said amount be equally divided by 48 and the monthly amount payable by the petitioner firm be determined and communicated to the petitioner. Upon such determination the petitioner firm shall pay the determined monthly installments within the 7th of every month - it is further provided that if the petitioner firm do not comply with the requirement of paying the determined monthly installment within the 7th of every month, there shall be a periodical review by the departmental authority every month and in the event of default, the earlier order of cancellation may be revived by the department without any further reference. Petition disposed off.

Summary

Issues:
1. Default in GST payment leading to cancellation of registration
2. Request for installment payment beyond statutory limit

Analysis:
1. The petitioner, a partnership firm providing security services, failed to pay GST dues amounting to ?2,58,30,801/- for the period of March 2018 to November 2020, resulting in the cancellation of their registration under Section 29 of the CGST Act, 2017. Despite submitting an application for revocation of cancellation, it was rejected, prompting the filing of a writ petition challenging the cancellation order.

2. The petitioner expressed willingness to pay the outstanding tax, interest, and penalty but due to financial constraints, requested to pay in 48 installments. The petitioner cited Circular No. 996/3/2015-CX, which allows for installment payments of arrears. The Circular empowers Commissioners to sanction payments in up to 24 monthly installments and Chief Commissioners for up to 36 monthly installments.

3. The High Court noted that while the Circular limits installments to 36, the petitioner sought 48 installments due to financial difficulties. The Court acknowledged its discretionary power under Article 226 of the Constitution but emphasized adherence to statutory limits. However, the Court recognized that denying further installments could lead to the petitioner's inability to pay, resulting in business closure and loss of tax revenue for the Department.

4. To address the situation, the Court, with the agreement of the GST Department, allowed the petitioner to pay the outstanding amount in 48 installments. The determined amount of ?2,58,30,801/- plus interest and penalty would be divided into equal monthly payments, starting from March 1, 2022. Non-compliance would lead to a monthly review and potential reinstatement of the cancellation order without further reference.

5. The Assistant Commissioner, Guwahati, Division-2, was tasked with determining the monthly installments by February 28, 2022, after providing the petitioner with a hearing. As long as the petitioner adheres to the payment schedule, the cancellation of registration would not take effect, barring any defaults by the petitioner.

6. The writ petition was disposed of, subject to the conditions outlined, providing relief to the petitioner while ensuring compliance with the installment payment plan to address the default in GST payment and potential business repercussions.