High Court of Madras grants fresh registration to petitioner in GST case

Case Name:

W.P.No.25148 of 2023 - Gopal Selvam vs. The Assistant Commissioner (ST), Selaiyur Assessment Circle

Key Takeaways:

1. The petitioner, who had a disability, failed to file returns on time, resulting in the cancellation of their GST registration.
2. The petitioner had the option to file an appeal or an application for revocation of the cancellation, but failed to do so within the stipulated timeline.
3. The petitioner filed returns and a fresh application for registration, which was rejected by the respondent.
4. The court observed that denying fresh registration to the petitioner would result in a leakage of revenue and ordered the respondent to permit the petitioner to carry on business.
5. The court directed the petitioner to deposit a sum of Rs.1,50,000/- in cash within thirty days and subject to compliance, the cancelled GSTIN registration shall be either revoked or a fresh GST registration shall be issued.

Case Synopsis:

This is an excerpt from an order issued by the High Court of Judicature at Madras on August 28, 2023. The case is W.P.No.25148 of 2023, filed by Gopal Selvam as the petitioner against The Assistant Commissioner (ST), Selaiyur Assessment Circle, Nandanam, Chennai, Tamil Nadu as the respondent.

The petitioner has filed a writ petition under Article 226 of the Constitution of India, seeking the issuance of a Writ of Certiorari to quash the impugned order under Rule No.9(4) of the GST Act, 2017. The impugned order, dated May 17, 2023, was issued by the respondent and rejected the petitioner’s application for fresh registration under the respective GST enactments to carry on business.

The petitioner, who appears to have a certain disability, had failed to file returns on time, resulting in the cancellation of their registration on January 25, 2022. The petitioner had the option to file an appeal against the cancellation of registration or to file an application for revocation of the cancellation within the stipulated timeline. However, the petitioner failed to exercise either option.

The records indicate that the petitioner filed the returns for the entire period on April 24, 2023, and also filed a fresh application for registration on the same day. However, this application was rejected by the respondent on May 17, 2023.

A Show Cause Notice under Section 63 (of Income Tax Act, 1961) read with Section 50(3) (of Income Tax Act, 1961) and Section 122(1)(x) (of Income Tax Act, 1961) and Rule 100(2) (of Income Tax Rules, 1962) of the GST Rules was issued to the petitioner on July 25, 2023. The notice sought to levy tax on the closing stock, which had apparently been cleared without payment of tax.

The petitioner was called for a personal hearing on August 11, 2023, but did not participate in the proceedings. The Department contended that the petitioner had debited the tax liability only from the Input Tax Credit availed on the supplies made to them and had paid only a sum of Rs.59,448/- in cash during the disputed period.

The court observed that the denial of fresh registration to the petitioner cannot be justified, considering that the petitioner needs to engage in business for their livelihood. The court also noted that the Department would be at a loss if registration is denied, as the petitioner would continue to do business without registration, resulting in a leakage of revenue.

Referring to a previous case, the court directed the respondent to permit the petitioner to carry on business either by allowing them to avail the benefit of a specific notification or by accepting the application for fresh registration. However, this is without prejudice to the rights of the respondent to complete the proceedings initiated against the petitioner for recovery of tax, if any, for the past.

The court also ordered the petitioner to deposit a sum of Rs.1,50,000/- in cash within thirty days from the date of receipt of the order. This is in addition to the major part of the tax liability already discharged by the petitioner. Subject to compliance with these conditions, the cancelled GSTIN registration of the petitioner shall be either revoked or a fresh GST registration shall be issued.

The writ petition was disposed of with the above observations, and no costs were awarded. The connected Writ Miscellaneous Petition was closed.

FAQ:

Q1: What was the petitioner seeking in the writ petition?

A1: The petitioner sought the issuance of a Writ of Certiorari to quash the impugned order rejecting their application for fresh registration under the GST Act.

Q2: Why was the petitioner’s registration cancelled?

A2: The petitioner’s registration was cancelled because they failed to file returns on time.

Q3: Did the petitioner have the option to appeal or apply for revocation of the cancellation?

A3: Yes, the petitioner had the option to file an appeal or an application for revocation of the cancellation within the stipulated timeline.

Q4: What did the court order in this case?

A4: The court ordered the respondent to permit the petitioner to carry on business either by allowing them to avail the benefit of a specific notification or by accepting their application for fresh registration. The court also directed the petitioner to deposit a sum of Rs.1,50,000/- in cash within thirty days.

A5: What will happen to the proceedings initiated against the petitioner for recovery of tax?

A5: The court stated that the proceedings initiated against the petitioner for recovery of tax will be completed as expeditiously as possible, without prejudice to the rights of the petitioner.

Mrs. K.Vasanthamala, learned Government Advocate takes notice on behalf of the respondent.

2. Heard the learned counsel for the petitioner and the learned Government Advocate for the respondent.

3. The petitioner has challenged the impugned order bearing Ref.No. ZA330523075212Y dated 17.05.2023 issued under Form GST REG-05 under Rule 9(4) of the Tamil Nadu Goods and Service Tax (TNGST) Rules, 2017 rejecting the application filed by the petitioner for fresh registration under the respective GST enactments to carry on business.

4. The petitioner appears to be a person with certain disability, who had failed to file returns in time and therefore, the petitioner's registration was cancelled on 25.01.2022.

5. The petitioner had an option to file an appeal against the aforesaid order cancelling the registration before the Appellate Commissioner under Section 107 of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017 or to file an application for revocation of the cancellation of registration under Section 30 of the respective GST enactments. Either way, these appeals or the applications were to be filed within the time line stipulated in the respective provisions. The petitioner failed to exercise the same.

6. The records indicate that the petitioner had filed the returns for the entire period on 24.04.2023 in GSTR-10. It appears that the petitioner has also filed a fresh application for registration on the same day, which has now been rejected by an order dated 17.05.2023.

7. The records further indicates that a Show Cause Notice under Section 63 (of Income Tax Act, 1961) read with Section 50(3) (of Income Tax Act, 1961) and Section 122(1)(x) (of Income Tax Act, 1961) and Rule 100(2) of the GST Rules under Form GST-ASMT-14 has been issued to the petitioner on 25.07.2023.

8. In the said notice, the respondent has sought to levy tax on the closing stock, which appears to have not been declared as the closing stock appears to have been cleared without payment of tax.

9. It is noticed that the petitioner was also called for personal hearing on 11.08.2023 at 11.30 a.m. The petitioner has also not participated in the proceedings.

10. Although the learned counsel for the petitioner would submit that the petitioner appeared for personal hearing, the contention of the Department is that all through the period beginning from 2017, the petitioner has debited the tax liability only from the Input Tax Credit availed on the supplies made to the petitioner and that only a sum of Rs.59,448/- has been paid in cash during the period in dispute.

11. Be that as it may, the denial of fresh registration to the petitioner cannot be justified particularly considering the fact that the petitioner will get into business one way or the other for his livelihood.

12. By declining registration, the Department is going to be the looser. There will be a leakage of revenue as the petitioner will still continue to do business without registration. Therefore, the registration should be denied to the petitioner.

13. This aspect was also considered by this Court in M/s.Suguna Cutpiece Center Vs. Appellate Deputy Commissioner (ST) (GST) and another, 2022 (2) TMI 933.

14. Under these circumstances, Court is inclined to dispose this writ petition by directing the respondent to permit the petitioner to carry on the business either by allowing the petitioner to avail the benefit of Notification No.3/2023-Central Tax dated 31.03.2023 as extended by Notification No.23/2023-Central Tax dated 17.07.2023 or in the alternative, accept the application filed for fresh registration.

15. This will be without prejudice to the rights of the respondent to complete the proceedings initiated under Section 63 (of Income Tax Act, 1961) read with Section 50(3) (of Income Tax Act, 1961) and Section 122(1)(x) (of Income Tax Act, 1961) and Rule 100(2) of the GST Rules under Form GSTASMT-14 vide Show Cause Notice 25.07.2023 and initiate appropriate proceedings against the petitioner for recovery of tax if any for the past. The proceedings initiated under Section 63 of the respective GST enactments on 25.07.2023 against the petitioner shall be completed as expeditiously as possible.

16. Considering the fact that the petitioner has discharged major part of the tax liability by debiting his Electronic Credit Ledger for the supplies effected by the petitioner during the period in dispute, the petitioner shall deposit a sum of Rs.1,50,000/- in cash within a period of thirty days from the date of receipt of a copy of this order without prejudice to the rights of the petitioner in the proceedings that is to be completed pursuant to the notice dated 25.07.2023 in Form GST ASMT-14 issued under Section 63 of the TNGST Act, 2017.

17. Subject to such compliance, the cancelled GSTIN registration of the petitioner under the CGST Act/TNGST Act, 2017 shall be either revoked or a fresh GST registration shall be issued to the petitioner.

18. This Writ Petition is disposed of with the above observations. No costs.

Consequently, connected Writ Miscellaneous Petition is closed.

28.08.2023