2024 (1) TMI 1363 - HC - GST

Cancellation of GST registration without providing opportunity of hearing - violation of principles of natural justice - time limitation to file an appeal - HELD THAT - A similar issue has been dealt with by a Division Bench of Bombay High Court in ROHIT ENTERPRISES VERSUS THE COMMISSIONER STATE GST AURANGABAD. THE DY. COMMISSIONER STATE TAX (APPEAL) AURANGABAD. THE STATE TAX OFFICER, AURANGABAD 2023 (2) TMI 759 - BOMBAY HIGH COURT where it was held that ' Applying the aforesaid guidelines to the facts of the present case, we find that the petitioner, who is sufferer of unique circumstances resulting from pandemic and his health barriers, would be put to great hardship for want of GST registration. The petitioner who is small scale entrepreneur cannot carry on production activities in absence of GST registration. Resultantly, his right to livelihood would be affected. Since his statutory appeal suffered dismissal on technical ground, we cannot allow the situation to continue. We find that, in the facts and circumstances of this case it would be appropriate to exercise our jurisdiction under Art. 226 of the Constitution of India.' This Court in TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR. 2022 (2) TMI 933 - MADRAS HIGH COURT , has held that no useful purpose would be served keeping the petitioners out of the Goods and Service Tax regime, as such assessees would still continue to his businesses and supply goods and services. The petitioner in this case is engaged in the business of executing works for Government and its agencies. Most of the small scale entrepreneurs like carpenters, electricians, fabricators, etc., are almost uneducated and they are not accustomed with handling of e-mails and other advance technologies - The Department shall workout the possibilities of issuing these notices in the respective regional languages and also by SMS and registered post. So that, the uneducated traders can also respond to these notices to some extent, otherwise, these notices will be an empty formality and will not serve any purpose for which it has been issued. The object of any Government is to promote the trade and not to curtail the same. The cancellation of registration certainly amounts to a capital punishment to the traders, like the petitioner. The impugned order dated 14.03.2023 cancelling the petitioner's registration is set aside. The petitioner is directed to file returns within a period of six weeks from the date of receipt of a copy of this order - Petition allowed.

Summary

Issues Involved:

1. Cancellation of GST registration without a hearing.
2. Non-filing of returns due to the petitioner's accountant's ill-health.
3. Inability to appeal due to the expiration of the statutory limitation period.
4. Impact of GST registration cancellation on the petitioner's livelihood.
5. Judicial precedents concerning the right to trade and the constitutional implications of GST registration cancellation.

Detailed Analysis:

1. Cancellation of GST Registration Without a Hearing:

The petitioner challenged the cancellation of his GST registration, arguing that the order was passed without providing him an opportunity for a hearing. The petitioner contended that he was issued a show cause notice but was not heard before the cancellation was executed. The respondent countered this by stating that sufficient opportunities were provided to the petitioner to respond to the show cause notice, and the cancellation was in accordance with the GST Act.

2. Non-filing of Returns Due to Accountant's Ill-health:

The petitioner attributed the non-filing of GST returns to his accountant's ill-health, which led to the oversight. The petitioner claimed that despite regularly filing returns through his accountant, the delay occurred due to unforeseen medical issues, which were beyond his control. This situation resulted in the cancellation of his GST registration.

3. Inability to Appeal Due to Expiration of Statutory Limitation Period:

The petitioner argued that although an appeal remedy was available under Section 107 of the GST Act, he was unable to file an appeal due to the expiration of the statutory limitation period. The GST portal did not accept his appeal as it was beyond the prescribed 90-day period. The respondent maintained that the limitation period is strictly enforced, and the portal automatically closes after this period, leaving no room for appeal.

4. Impact of GST Registration Cancellation on the Petitioner's Livelihood:

The petitioner emphasized that the cancellation of his GST registration severely impacted his ability to conduct business and earn a livelihood, as GST registration is mandatory for executing contract works with the government. The court acknowledged the petitioner's predicament, noting that the cancellation of registration effectively curtailed his right to trade, which is constitutionally protected under Article 19(1)(g) and Article 21.

5. Judicial Precedents Concerning Right to Trade and Constitutional Implications:

The judgment referenced several precedents, including decisions by the Bombay High Court and the High Court of Uttarakhand, which highlighted the constitutional implications of denying GST registration. These precedents underscored that the right to trade and livelihood should not be curtailed due to procedural lapses, particularly when such lapses result from extraordinary circumstances like medical emergencies or the pandemic. The courts emphasized that the GST enactment should not be interpreted to deny citizens their fundamental rights and that the objective of the GST regime is to facilitate trade, not to penalize traders unduly.

In the present case, the court applied the principles from these precedents, particularly the decision in Suguna Cutpiece v. Appellate Deputy Commissioner, which advocated for the revival of GST registration to ensure that small-scale entrepreneurs could continue their trade and contribute to the state's revenue. The court directed the petitioner to file the pending returns within six weeks and set aside the cancellation order, thereby allowing the petitioner to resume his business activities.

Conclusion:

The court concluded that the cancellation of the petitioner's GST registration was disproportionate and not in line with the objectives of the GST regime. By setting aside the cancellation order, the court reinforced the principle that procedural technicalities should not impede the fundamental right to trade and livelihood, especially for small-scale entrepreneurs. The judgment reflects a balanced approach, ensuring compliance with tax laws while safeguarding constitutional rights.