2025 (2) TMI 130 - HC - GST

Cancellation of the GST registration of the petitioner firm - failure to furnish returns for a continuous period of six months - failure on account of health issues of petitioner - HELD THAT - In the present case the petitioner has not filed returns for a continuous period of six months for which the GST Registration of the petitioner s firm was cancelled. Due to ill-health the monthly returns have not been filed by the petitioner and without considering this aspect the respondent has cancelled the GST Registration which caused great hardship to the petitioner in filing the returns as well as for payment of tax dues. Therefore it would cause loss for both the petitioner and the respondent. Hence this Court is inclined to set aside the impugned order and revoke the cancellation of GST Registration passed by the respondent. The respondent shall take suitable steps by instructing GST Network New Delhi to make suitable changes in the architecture of the GST Web portal to allow the petitioner to file the returns and to pay the tax/penalty/fine within a period of four weeks from the date of receipt of a copy of this order. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the cancellation of the GST registration of the petitioner firm due to non-filing of returns for a continuous period of six months was justified.

2. Whether the petitioner's health issues constitute a valid reason for the failure to file returns and whether this should have been considered by the respondent before cancelling the registration.

3. Whether the cancellation of GST registration can be revoked and under what conditions this revocation should occur.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of GST Registration Cancellation

The relevant legal framework involves the provisions of the Goods and Services Tax (GST) Act, which mandates the filing of returns by registered entities. The failure to comply with this requirement can lead to the cancellation of registration. The respondent had issued a show cause notice to the petitioner due to non-filing of returns for six months, which the petitioner failed to respond to, leading to the cancellation.

The Court interpreted that while the legal framework allows for cancellation, the respondent should have considered the petitioner's circumstances, specifically the health issues that impeded compliance. The Court found that the cancellation without considering these factors was harsh and caused undue hardship to the petitioner.

Issue 2: Consideration of Health Issues

The petitioner argued that health issues prevented the timely filing of returns, which was not considered by the respondent. The Court acknowledged this argument, noting that procedural fairness required the respondent to consider such mitigating circumstances before taking the severe step of cancellation.

The Court referenced a previous judgment, "Suguna Cutpiece Centre Vs. the Appellate Joint Commissioner of GST," which emphasized considering appeals on their merits irrespective of delays. This precedent supported the petitioner's position that their health issues should have been a factor in the respondent's decision-making process.

Issue 3: Conditions for Revocation of GST Registration Cancellation

The Court concluded that the cancellation should be revoked, subject to specific conditions to ensure compliance with the GST Act. These conditions include:

- The respondent must instruct the GST Network to modify the portal, allowing the petitioner to file overdue returns and pay dues within four weeks.

- The petitioner must file all pending returns with applicable tax dues, interest, and late fees within four weeks of registration restoration.

- Payments cannot be made using unutilized Input Tax Credit (ITC) until it is scrutinized and approved by the appropriate authority.

- Only approved ITC can be used for future tax liabilities.

- Non-compliance with these conditions will nullify the benefits granted by this order.

SIGNIFICANT HOLDINGS

The Court held that the cancellation of the GST registration was unjustified without considering the petitioner's health issues. The Court emphasized the need for procedural fairness and the consideration of mitigating circumstances in administrative decisions.

The core principles established include the importance of considering individual circumstances in administrative actions and ensuring that procedural fairness is upheld. The Court's final determination was to set aside the cancellation and restore the GST registration, subject to the fulfillment of specific conditions to ensure compliance with tax obligations.

The judgment underscores the balance between enforcing tax compliance and recognizing legitimate hardships faced by taxpayers, ensuring that administrative actions are fair and considerate of individual circumstances.