2023 (8) TMI 1089 - HC - GST

Jurisdiction to conduct audit - the petitioner's registration is cancelled, now he is an unregistered concern - Failure to pay collected tax - closure of business - respondents submitted that the grounds raised in the Writ Petition cannot be accepted, since it is a recently closed unit and the respondent is having every right to conduct audit - HELD THAT - Section 65 of CGST Act, states that the Commissioner or any other officer authorized through a general or specific order to conduct audit for any registered person. When the section specifically states 'any registered person', then it ought to be construed as existence concern and the unregistered person is exempted from the purview of the said section 65. But the contention of the respondent is that the audit is being conducted for a period from 2017-2018, 2021-2022. Therefore, the respondent claims that for the said period, the petitioner was a registered firm and for the said period, the respondent is empowered to conduct audit. On perusing Section 65, it is stated that the audit can be conducted to the said registered persons for such period , for such frequency and in such manner . When a Section provides for periodical audit, the respondent having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit. However, this will not preclude the respondent from initiating assessment proceedings for the said concern under Sections 73 and 74. Therefore, the said impugned order is liable to be quashed. Hence, the impugned order is quashed with liberty to the respondent to initiate assessment proceedings under Sections 73 and 74 of the Act. Petition allowed.

Summary

Issues involved:
The issues involved in the judgment are the challenge against the show cause notice for conducting an audit by a partnership firm registered under the Goods and Services Tax Act, 2017, which intended to close its business and failed to pay the collected tax.

Judgment Summary:

Issue 1: Challenge against the show cause notice for conducting an audit
The petitioner, a partnership firm registered under the Goods and Services Tax Act, 2017, sought to challenge the show cause notice issued for conducting an audit after the firm intended to close its business without paying the collected tax. The respondent argued that the show cause notice cannot be challenged at this stage and that the grounds raised in the petition are not acceptable as the firm is recently closed, giving the respondent the right to conduct an audit.

Issue 2: Jurisdiction to conduct audit after registration cancellation
The petitioner contended that as per Section 65 of the CGST Act, the respondent is not empowered to conduct an audit after the petitioner's registration is canceled, making it an unregistered concern. However, the respondent claimed that the audit was for a period when the petitioner was registered, justifying the audit.

The Court analyzed Section 65 of the CGST Act, which empowers the Commissioner or authorized officers to conduct audits for registered persons. It was observed that the audit should be conducted for registered persons within a specific period and manner. The Court noted that the sudden decision to conduct an audit after years of inactivity does not align with the provision for periodical audits. The Court concluded that while the respondent can initiate assessment proceedings under Sections 73 and 74, the impugned order for audit was quashed, granting liberty to the respondent for assessment proceedings.

Therefore, the Writ Petition was allowed, and no further orders were issued, leading to the closure of connected miscellaneous petitions.