CANCELLATION OF GST REGISTRATION - RECENT CASE LAWS

[Mr. M. GOVINDARAJAN]

Now-a-days the cancellation of registration is many in count.  The registered persons are to approach the High Courts for remedy.  Here some of the latest case laws are discussed.

Violation of principles of Natural Justice

In M/S. DYM AUTO WORLD VERSUS ASSISTANT COMMISSIONER OF CGST AND CENTRAL EXCISE & ORS. - 2023 (2) TMI 39 - CALCUTTA HIGH COURT, the petitioner could not file GST return within the time.  He incurred heavy losses in his business.  He lost his control and even attempted to commit suicide.  He was admitted in the hospital during the whole of December 2020 and also in January 2021.  Since the petitioner did not file the return for a continuous period of 6 months the Department issued a show cause notice as to why GST registration would not be cancelled.  The petitioner did not give reply to the said notice.  However the Authority passed an order cancelling the registration holding that the reply of the petitioner to the show cause notice was considered.  The High Court held that the petitioner was not given opportunity of hearing thus violating the principles of Natural Justice.  The petitioner was under tremendous mental stress and physical illness and it is demonstrated in documents filed by the petitioner.  The High Court directed the petition to make payment of up to date with interest and penalty within 3 weeks and directed the Authority to restore the registration. 

Alternative remedy

In DEVENDRA PRASAD VERSUS ASSISTANT COMMISSIONER, STATE GOODS & SERVICE TAX, SECTOR, 6 DEHRADUN AND ANOTHER - 2022 (12) TMI 1175 - UTTARAKHAND HIGH COURT, the petitioner failed to furnish returns for a continuous period of six months.  The Department issued show cause notice to the petitioner and thereafter GST registration was cancelled.  Therefore the petitioner filed the present writ petition before the High Court with the prayer that the impugned cancellation order to be quashed.  The Revenue contended that alternative forum for filing an application for revocation of cancellation of GST registration was available.  The High Court directed the assessee to file an application for revocation of registration before the Department within 21 days under Section 30 of CGST Act and in terms of Rule 23.  Though it was time barred, limitation was to be waived.  The petitioner should submit returns for defaulted six months and any further completed months after revocation. On payment of due, if any, the petitioner’s case would be considered liberally by the revenue and the same would be disposed of within a period of 30 days.

No response to show cause notice

In ACAMBIS HELPLINE MANAGEMENT PVT. LTD. THRU. DIRECTOR TAUQUEER AHMAD VERSUS UNION OF INDIA THRU. PRIN. COMMISSIONER, CENTRAL GST LKO. AND 2 OTHERS- 2022 (12) TMI 857 - ALLAHABAD HIGH COURT, the petitioner failed to file GST returns for a continuous period of 6 months.  Therefore the Revenue issued show cause notice to the petitioner with directions to give reply within 30 days from the date of receipt of notice.  The petitioner could not furnish reply to the show cause notice because of his health issues and its poor financial conditions.  The registration was cancelled vide order dated 03.01.2022 for the reason that the petitioner did not file reply to the show cause notice issued.  The High Court observed that there is no reason whatsoever in the impugned order for cancelling the registration of the petitioner.  The only reason stated that the petitioner did not respond to the show cause notice.  The High Court was of the view that even in case that the petitioner did not give response to the show cause notice it was incumbent to the competent authority to consider the fact of case and come to the conclusion that the facts necessitate cancelling of the registration of the petitioner.  The High Court held that the impugned order dated 03.01.2022 is illegal and hence set aside the impugned order. The High Court directed the petitioner to file reply to the show cause notice within 3 weeks from the date of order.  The High Court further directed that in case the petitioner files his reply along with the certified copy of the order of High Court, the department shall proceed to pass a fresh order in accordance with law.

Latest Notification

The Central Government, vide Notification No. 03/2023-Central Tax, dated 31.03.2023, notified that the registered person, whose registration has been cancelled under clause (b) or clause (c) of sub-section (2) of section 29 of the said Act on or before the 31.12.2022, and who has failed to apply for revocation of cancellation of such registration within the time period specified in section 30 of the said Act as the class of registered persons who shall follow the following special procedure in respect of revocation of cancellation of such registration,-

• the registered person may apply for revocation of cancellation of such registration upto the 30th day of June, 2023;
• the application for revocation shall be filed only after furnishing the returns due upto the effective date of cancellation of registration and after payment of any amount due as tax, in terms of such returns, along with any amount payable towards interest, penalty and late fee in respect of the such returns,
• no further extension of time period for filing application for revocation of cancellation of registration shall be available in such cases.

The Explanation to this Notification provides that the person who has failed to apply for revocation of cancellation of registration within the time period specified in section 30 of the said Act includes a person whose appeal against the order of cancellation of registration or the order rejecting application for revocation of cancellation of registration under section 107 of the said Act has been rejected on the ground of failure to adhere to the time limit specified under Sub-section (1) of section 30 of the said Act.

In M/S. RADHE PACKAGING VERSUS UNION OF INDIA - 2023 (4) TMI 703 - GUJARAT HIGH COURT, a show-cause notice, dated 10.08.2022, was issued to the petitioner whereby the GST registration of the petitioner was proposed to be cancelled mentioned more than one ground that the returns furnished by the petitioner under Section 39 of the Central Goods and Services Tax Act, 2017 were with incomplete details and that there was failure to furnish returns for a continuous period of six months.  The petitioner filed reply to the show cause notice.  The reply was not accepted by the Authority and the registration was cancelled vide order dated 10.09.2022.  The petitioner filed the present writ petition challenging the said order before the High Court.  The prayer of the petitioner is as below-

1. to set aside the order dated 10.09.2022 whereby the registration of the petitioner under the Gujarat Goods and Services Tax Act, 2017, came to be cancelled. 
2. to set aside the show cause notice dated 10.08.2022, which preceded the order of cancellation
3. to direct the respondent authorities to restore the registration of the petitioner.

The petitioner contended that the returns were filed prior to the cancellation.   After cancellation, in view of the cancellation, returns could not be filed. 

During the hearing the Revenue produced copy of the Notification dated 31.03.2023 issued under Section 148 of the Central Goods and Service Tax Act, 2017.  The High Court analyzed the above said notification.  The High Court held that the aforesaid Notification would apply to the facts of this case for which there is no dispute. The High Court directed the petitioner may approach the competent authority to avail the benefit of the Notification and seek revocation of the cancellation of registration.   If the petitioner approaches the competent authority in light of the Notification dated 31.03.2023, the authority will take appropriate decision without booking any delay.