GSTN cannot be cancelled on ground of non-filing of returns for transfer of stock and capital goods

Inverted Tax Structure: GST Refund cannot be denied on ground that information of transfer of business, stocks and capital goods is not filed

The petitioner impugns order dated 09.03.2022 passed by GST Officer, rejecting the petitioner’s claim for input tax credit (hereafter ‘ITC’) of Rs. 24,91,347/- (Twenty Four Lakh Ninety One Thousand Three Hundred And Forty-Seven Rupees). The petitioner’s claim for refund of ITC was rejected because the petitioner was found to be non-existent and non-functional at the registered place of business. The said order is also inextricably linked with the cancellation of the petitioner’s GST registration.

The petitioner is, essentially, aggrieved by the denial of ITC refund consequent to the cancellation of its GST registration.

As per court, in the present case, there is no allegation that the petitioner had obtained its registration by means of fraud, wilful misstatement or suppression of facts. In any view, there is no material to establish any such allegation as there is no dispute that the petitioner had filed his returns and paid the tax as disclosed by it. The only ground on which the petitioner’s registration has been cancelled is that he has contravened the provisions of the Act inasmuch as he has not filed the requisite returns for transfer of stock and capital goods. He has also not filed the requisite information disclosing transfer of business to the firm. Thus, it is assumed that the petitioner was non-existent. However, the material on record indicates that the petitioner was carrying on its business from its principal place of business in Delhi and had shifted it to Haryana. In these facts, the petitioner’s registration cannot be cancelled from the date he had obtained the same.

Final Order:

33. We are also unable to accept that the petitioner can be denied the refund of accumulated ITC solely on the ground that he had not filed the necessary information regarding transfer of business and other returns to establish the transfer of stocks and capital goods more so when the petitioner’s claim for inverted tax structure as well as the accumulation of ITC has been verified by respondent no.2.

34. In the peculiar circumstances of this case, we consider it apposite to direct that the impugned order dated 14.01.2022 cancelling the petitioner’s registration with effect from 02.07.2017 be set aside. The respondent no.1 shall initiate proceedings for cancellation of the petitioner’s registration with effect from 31.07.2021 and also determine the amount of tax, penalty or interest that may be payable by the petitioner for not reflecting the transfer of stock and capital goods to the firm.

35. The impugned order dated 09.03.2022 rejecting the petitioner’s application for refund is also set aside. Respondent no.2 is directed to reconsider the petitioner’s application for refund in view of the directions issued above.

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