GST: High Court Restores Time-Barred Appeal, Condones Delay Upon Establishing Sufficient Cause

A law firm named August Attorneys LLP (petitioner) filed a writ petition in the Delhi High Court under Article 226 of the Constitution of India. The law firm obtained its GST registration no. 07ABSFA3842K1Z1 on September 30, 2020. With time, due to the COVID-19 pandemic, the structure of the partnership changed due to the entry and exit of new partners. The firm filed Form 4 to ROC (Registrar of Companies) in March 2021 to indicate the changes in partners.

More changes took place in the structure of the partnership firm in July 2024. Because of these changes, the firm claims that it could not file its GST return through its chartered accountant.

The GST department issued a Show Cause Notice (SCN) to the company on October 08, 2022, asking for the reason why their GST registration should not be cancelled. However, the company claims that it did not receive any SCN. Later on, the department issued an order dated September 05, 2023, cancelling the GST registration of the company, with effect from October 01, 2021. The company did not respond to the notice and did not attend the hearing.

Later, after reconstituting its partnership, it filed an appeal before the Appellate Authority. However, this appeal was rejected, as it was filed after the due date (under GST law, Section 112, an appeal should be filed within three months plus an additional month). Here in this case, since the appeal was filed after a four-month period, the appellate authority dismissed it as time-barred.

However, the company did not accept this cancellation and further appealed to the High Court, arguing that it never received any SCN or the cancellation order in the past. Hence, it could not submit any reply to them. Therefore, the delay should be excused because of these unusual circumstances.

The high court carefully examined the entire case and made the following points:

The GST cancellation can seriously harm a business, especially a professional service company like a law firm, which needs GST registration to function effectively. Provision under Section 107 of the CGST Act does not allow for condonation (excusing) of delay if there is sufficient cause.

There is no doubt that under Section 112 of the CGST Act, there is a period of limitation which has been fixed for filing of the appeal. The question as to whether delay in appeal can be condoned is presently stated to be pending before the Supreme Court.

The limitation period to file an appeal should start only when the order is actually communicated to the petitioner. If they never received the order, how could they appeal in time? The Appellate Authority may have wrongly applied Section 112, which actually relates to appeals before the Appellate Tribunal, not the Appellate Authority.

Considering all this, the High Court ruled that the law firm had shown a sufficient cause for the delay in filing the appeal. Hence, allowed condonation of delay and restored the appeal and directed the Appellate Authority to hear and decide the appeal on merit.

The court imposed a cost of Rs. 25,000 to be paid by the law firm to the GST Department as a condition for restoring the appeal. Also noted that the law firm is willing to file all pending GST returns, and the Commissioner should give it an opportunity to do so before making any decision on cancellation.