2024 (7) TMI 1023 - HC - GST

Challenge to audit notice - main thrust of the argument of counsel for the petitioner is that Authorities can undertake audit of a registered person only - cancellation of GST registration of petitioner - HELD THAT - Section 29 (3) of the CGST Act pertains to cancellation of registration. Section 29 (3) of the CGST Act clearly mandates that the cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation. Thus Sub-Section (3) of Section 29 of the CGST Act makes it adequately clear that even after cancellation, if any tax liability subsists, the registered person is required to pay the tax. Section 65 (1) of the CGST Act also authorizes the Authority to undertake audit of any registered person for such period. Admittedly, the petitioner was a registered person for the period for which the assessment order has been passed and notice dated 06.03.2020 to initiate audit has been issued. It is also pertinent to note that after audit, show cause notice was issued under Section 73 of the CGST Act and a detailed reply was filed by the petitioner and only thereafter, an assessment order has been passed against the petitioner. There are no error in the proceedings initiated by respondents as registered person under Section 65 of the CGST Act would include those who were registered for the period for which audit was undertaken. The petitioner, who has fraudulently availed the ITC and has thereafter, applied for cancellation of registration, is not entitled for any relief from the Court. Petition dismissed with a cost of Rs. 25,000/-.

Summary

Issues:
Petitioner's claim for relief based on the legality of the audit notice and subsequent assessment order under the CGST Act.

Analysis:
1. The petitioner filed a Civil Writ Petition seeking various reliefs, including quashing of the audit notice and assessment order, contending that as a canceled registered person, the audit proceedings were contrary to the CGST Act.

2. The petitioner argued that since the foundation of the proceedings was against the mandate of the CGST Act, any resulting assessment order should be quashed, emphasizing that the High Court can intervene in writ jurisdiction if proceedings are unlawful.

3. The petitioner relied on a judgment from the Madras High Court to support the argument that audits can only be conducted against registered persons, which was a crucial point in the case.

4. The respondents opposed the petition, citing Section 29(3) of the CGST Act, which states that cancellation of registration does not absolve a person from tax liabilities incurred before cancellation, thus justifying the audit even after registration cancellation.

5. It was argued that a harmonious interpretation of Section 65 of the CGST Act allows audits for registered persons, and since the petitioner was registered during the relevant period, the audit and subsequent actions were lawful.

6. The Court examined Section 65(1) and Section 29(3) of the CGST Act, concluding that the audit of the petitioner, who was registered during the audit period, was valid, and the petitioner's attempt to benefit from writ jurisdiction due to registration cancellation after fraudulent activities was rejected.

7. The Court dismissed the writ petition, imposing a cost on the petitioner and directing the deposit of the specified amount with the Rajasthan High Court State Legal Services Authority, while also allowing the petitioner to pursue an appeal under the Act without affecting the appellate process.

8. The judgment clarified that any decision made by the Court would not impact the merits of the case before the Appellate Authority, ensuring a fair and separate consideration of the case in the appellate process.