2020 (3) TMI 477 - HC - GST

Cancellation of registration of petitioner firm - failure to file GST returns for 6 months continuously at time of issuing SCN but, return for one month filed as on the date of order passed for cancellation of registration - therefore continuous default remains for 5 months only - Scope of 29(2)(c) of the CGST Act - HELD THAT - Sec. 29(2)(c) mandates that power for the cancellation of registration in a case where there is continuous six months' default on the part of the assessee in filing the returns. Since the competent official is obliged to issue a notice in the nature of Ext.P-1 before he passes final orders, it goes without saying that the requirement of 6 months' continuous period should be fulfilled both at the time of issuance of the abovesaid notice in terms of the proviso to Sec. 29(2) of the CGST Act read with Rule 22 of the CGST Act, but also at the stage of passing the final order cancelling the registration as per Sec. 29(2)(c). In the instant case, the jurisdictional fact regarding the six months' continuous default on the part of the assessee is certainly fulfilled at the time of issuance of Ext.P-1 show cause notice dated 13.11.2019. Whereas, the said vital requirement of jurisdictional fact is non-existent as on the date of issuance of the impugned Ext.P-3 cancellation order dated 10.12.2019. If that be so, it is only to be held that the impugned order as per Ext.P-3 is illegal and ultra vires and is liable to be interdicted by this Court. Accordingly, it is ordered that the impugned Ext.P-3 order will stand quashed. Petition disposed off.

Summary

Issues Involved:
1. Legality of the cancellation of GST registration under Sec. 29(2)(c) of the CGST Act.
2. Compliance with procedural requirements for cancellation of registration.
3. Jurisdictional facts for invoking the cancellation power.

Detailed Analysis:

1. Legality of the Cancellation of GST Registration under Sec. 29(2)(c) of the CGST Act:
The petitioner, an assessee of goods and services tax, defaulted in filing returns from May 2019 onwards due to a financial crisis. The 4th respondent issued a notice (Ext.P-1) proposing to cancel the registration under Sec. 29(2)(c) of the CGST Act for non-filing of returns for a continuous six-month period. The petitioner contended that as of the date of the notice (13.11.2019), there was only a five-month continuous default, not the mandatory six months. The petitioner filed the return for May 2019 on 10.12.2019, the same day the cancellation order (Ext.P-3) was issued. The court found that as of 10.12.2019, the petitioner had only a five-month continuous default, not six months, making the cancellation order illegal and ultra vires.

2. Compliance with Procedural Requirements for Cancellation of Registration:
Sec. 29(2) of the CGST Act and Rule 22 of the CGST Rules outline the procedural requirements for cancelling registration. The proper officer must issue a notice requiring the assessee to show cause within seven working days. The petitioner argued that the cancellation order was issued without considering the return filed on 10.12.2019. The court noted that the proper officer could not have known about the return filed on the same day. However, since the petitioner had only a five-month default as of 10.12.2019, the procedural requirements were not met, and the cancellation was invalid.

3. Jurisdictional Facts for Invoking the Cancellation Power:
Sec. 29(2)(c) mandates a continuous six-month default for cancelling registration. The court emphasized that this requirement must be met both at the time of issuing the show cause notice and the final cancellation order. In this case, the jurisdictional fact of six months' continuous default was fulfilled at the time of the notice (13.11.2019) but not at the time of the cancellation order (10.12.2019). The court held that the absence of this jurisdictional fact at the time of the final order rendered the cancellation illegal.

Conclusion:
The court quashed the cancellation order (Ext.P-3) due to the lack of a continuous six-month default at the time of the order. The court clarified that it only decided on the jurisdictional fact for invoking Sec. 29(2)(c) and that the competent officer could proceed in accordance with the law if the petitioner subsequently defaulted for six continuous months. The writ petition was disposed of with these observations and directions.