2022 (12) TMI 87 - HC - GST

Cancellation of registration of the petitioner under the U.P. Goods and Services Tax Act, 2017 - non-filing of return within time - HELD THAT - It is not in dispute that due to non filing of the return by the petitioner a show a cause notice was given to him by the Taxing Authority on 29.4.2019, against which no reply was filed by the petitioner and the cancellation of registration came into effect from 14.5.2019 as stated in the said show cause notice. The assessee after coming to know about the cancellation of registration had deposited the entire tax on 30th January, 2021 and had also filed return before the concerned authority. On 17.2.2021 the Assistant Commissioner rejected the revocation application of the petitioner on the ground that the return was not filed within time. The appeal of the petitioner was also rejected by the First Appellate Authority on the ground that the return was not filed within time. In the present case, as the petitioner has come with the case that he has deposited the entire tax and has filed return in the year 2021, the said Act having not been denied by the State, the rejection of registration solely on the ground of delay in moving the revocation application, is not sustainable in law. Moreover, the Appellate Authority has not recorded any categorical finding as to the service of notice and merely on the ground that the application was time barred, proceeded to uphold the order of rejection of revocation application. Considering the facts and circumstances of the case, the orders dated 14.5.2019 and 25.3.2021 passed by the opposite parties are unsustainable in the eye of law and are hereby quashed. Petition allowed.

Summary

Issues:
1. Cancellation of registration under the U.P. Goods and Services Tax Act, 2017.
2. Rejection of revocation application by the Taxing Authority and the First Appellate Authority.
3. Interpretation of Rule 23 of U.P. GST Rules, 2017 regarding the timeline for revocation application.
4. Compliance with filing returns and payment of outstanding taxes.

Analysis:
1. The petitioner's registration under the U.P. Goods and Services Tax Act, 2017 was cancelled due to non-filing of returns, leading to a show cause notice and subsequent cancellation order dated 14.5.2019. The petitioner deposited the outstanding tax amount on 30th January, 2021, and filed a revocation application on 3.2.2021 as per Rule 23 of the Rules, 2017. The Taxing Authority rejected the application on 17.2.2021, which was upheld by the First Appellate Authority on 25.3.2021.

2. The petitioner contended that the revocation application rejection was incorrect as the entire tax amount was paid on 3.1.2021, and the return was filed simultaneously. Citing precedents, the petitioner argued that the rejection was unfounded. The Standing Counsel, however, emphasized Rule 23's requirement of filing the revocation application within 30 days of cancellation, which was not met in this case.

3. The Court observed that Rule 23 mandates the revocation application within 30 days of the cancellation order. The petitioner's compliance with filing returns and payment in January 2021 was noted, and the lack of denial by the State regarding these actions was crucial. The purpose of the rule is to allow the assessee an opportunity to rectify and prevent permanent cancellation, ensuring business continuity.

4. Referring to previous judgments, the Court highlighted the importance of smooth business operations without undue hindrances from tax authorities. In this case, since the petitioner had cleared dues and filed returns in 2021, the rejection based solely on a delayed revocation application was deemed legally unsustainable. The lack of a specific finding on the notice's service by the Appellate Authority further weakened the rejection's legal standing.

In conclusion, the Court found the cancellation and rejection orders legally flawed and quashed them, allowing the writ petition in favor of the petitioner.