9911796707
TMI Blog2024 (11) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... inding that in the absence of proper documentation reversal of input tax credit (Rs.10,36,950/- + Rs.1,17,75,353/- + Rs.1,17,75,353/-) amounting to Rs.2,45,87,656/- is not in accordance with the law. Preliminary audit reports also suggest short disclosure of other income, resulting in the short payment of tax. The preliminary audit report prima facie has found a total tax plus interest liability of Rs.7,01,31,710/- for the period 2020-21. In our view, the petitioner cannot escape non-facing audit proceedings in the light of these prima facie findings of the audit conducted by the authorities by taking a plea that since they have now been de-registered they are not covered by the provisions of Section 65 of the SGST Act. There is an obligation cast on a person in whose case of audit is conducted to comply with the directions of the tax authorities under Section 65(5) and these obligations are not affected even if registration is subsequently cancelled. This is made clear from the provisions of Section 29(3) of the SGST Act. If the contention of the petitioner that because they are de-registered, they are not covered by the provisions of Section 65 is accepted, then it would lead to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner was issued a registration certificate under the Central Goods and Services Tax Act, 2017 (CGST Act). After conducting business since then, on 27 March 2023, the petitioner applied for cancellation of its CGST registration on the ground that they have ceased to be liable to pay tax on account of the closure of business. On 2 May 2023, the respondents passed the order for cancellation of registration, and the registration was cancelled on 1 April 2023. 5. On 6 November 2023, the respondents issued notice for conducting an audit for the period April 2021 to April 2022, although in reference, it is stated as 2020-21. The said notice was replied by the petitioner on 11 November 2023 wherein the petitioner relying upon the decision of the Madras High Court in the case of Tvl. Raja Stores Vs. Assistant Commissioner (ST) (2023) 153 taxmann.com 657 (Madras) submitted that since the petitioner's registration is cancelled, an audit under Section 65 of the Act cannot be conducted. However, on 21 November 2023, the respondents issued the requisition calling for various documents from the petitioner. The respondents rejected the aforesaid objection of the petitioner and stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port. Therefore, the present petition may be dismissed. 9. We have heard learned counsel for the petitioner and the respondents. The short issue posed for our consideration is whether the provisions of Section 65 of the SGST Act dealing with audit would apply to a person who was registered under the CGST Act for the period for which an audit is ordered but who ceases to be registered on the date the audit is ordered ? Analysis Conclusions:- 10. Before we devolve upon our reasoning, it is apt to reproduce the relevant provisions of Section 2(13), Section 2(94), Section 29(3) and Section 65 of the SGST Act and Rule 101 of the SGST Rules. Definitions 2. (13) audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder; 2. (94) registered person means a person who is registered under section 25 but does not include a person having a Unique Identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper officer may initiate action under section 73 or section 74. Rule 101. Audit- (1) The period of audit to be conducted under sub-section (1) of section 65 shall be a financial year 1[or part thereof] or multiples thereof. (2) Where it is decided to undertake the audit of a registered person in accordance with the provisions of section 65, the proper officer shall issue a notice in FORM GST ADT-01 in accordance with the provisions of sub-section (3) of the said section. (3) The proper officer authorised to conduct audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provisions of the Act and the rules made thereunder, the correctness of the turnover, exemptions and deductions claimed, the rate of tax applied in respect of the supply of goods or services or both, the input tax credit availed and utilised, refund claimed, and other relevant issues and record the observations in his audit notes. (4) The proper officer may inform the registered person of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read contextually, as provided in Section 2 itself. Therefore, in our view, the phrase registered person for the purpose of Section 65 of the SGST Act and on a holistic reading of all the connected provisions which we advert hereinafter, it would mean a person who was registered at some point of time under the GST Act even though, subsequently, such registration has been cancelled. Therefore, the contention of the petitioner that for the purpose of Section 65 of the SGST Act, a registered person would not include a person whose registration has been cancelled is misconceived. 14. Section 2(13) defines audit to mean the examination of records, returns and other documents maintained or furnished by a registered person under this Act or Rules or under any other laws for the time being in force, for the purpose of verifying the correctness of turnover declared, tax paid, refund claimed and input tax credit availed and to assess his compliance with the provisions of this Act or the Rules made thereunder. Most of the phrases use the past tense, implying that an audit is concerned chiefly with the documents maintained or furnished, turnover declared, input tax credit already availed, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has subsequently de-registered himself, an audit can be conducted at the place of the tax authorities. In the instant case, the notice under challenge, which is in accordance with Form ADT- 01, specifies the respondents' place for conducting the audit. Therefore, to suggest that in the case of an unregistered person, an audit cannot be conducted at the place of business, and consequently the provisions of Section 65 are not applicable is also not acceptable. 19. The objective of Section 65 of the SGST Act and more particularly Section 65(7) of the SGST Act for conducting the audit by tax authorities is to come to a prima facie conclusion, after giving sufficient opportunity to the noticee, about whether tax has not been paid or has been short-paid or erroneously refunded or input tax credit has been wrongly availed or utilised. If the same is detected, the proper officer may initiate action under Section 73 or Section 74 of the SGST Act. Section 65 is in aid for initiating proceedings under Section 73 or Section 74 for recovery of tax short-paid, not paid, erroneously refunded, or input tax credit wrongly availed or utilised. 20. Mr Raichandani submitted that the Respondents ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea that since they have now been de-registered they are not covered by the provisions of Section 65 of the SGST Act. 23. Section 29(3) of the SGST also provides that cancellation of registration shall not discharge such person of any obligation under the SGST Act or the Rules. Section 65(5) provides that the authorised officer may require the registered person to afford him the necessary facility to verify the books of accounts or other documents and/or to furnish such required information and render such assistance for the timely completion of the audit. There is an obligation cast on a person in whose case of audit is conducted to comply with the directions of the tax authorities under Section 65(5) and these obligations are not affected even if registration is subsequently cancelled. This is made clear from the provisions of Section 29(3) of the SGST Act. If the contention of the petitioner that because they are de-registered, they are not covered by the provisions of Section 65 is accepted, then it would lead to provisions of Section 29(3) dealing with discharge of obligation under the Act or the Rules redundant. It is a settled position that any interpretation that will mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 73 and 74 of the Act. As we have discussed earlier, provisions of section 65 of the SGST Act and the scheme thereof are in aid of sections 73 and 74. Therefore, even on this count, we respectfully disagree with the views expressed by the learned Single Judge of the Madras High Court. 27. In their preliminary audit findings dated 11 October 2024, the respondents relied upon the Rajasthan High Court's decision in the case of Ashoka Fabricast (P.) Ltd. vs. Union of India (2024) 162 taxmann.com 719 (Rajasthan) . For the reasons given above, we agree with the Rajasthan High Court s interpretation of Section 29(3) read with Section 65(1). However, the view taken by us is independent and without getting influenced by the decision cited at bar but is based on our independent analysis of the Scheme of the Act. 28. We may also observe that Exhibit G is a notice dated 6 November 2023 which in its reference gives audit period of 2020-21 but in body refers to 2021-22. If it is 2020-21 then Exhibit- G is not challenged in prayer clause and if it is 2021-22 then even in that case there is no challenge. Therefore even on this account in the absence of challenge of Exhibit-G, present peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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