Non-Filing of GST Returns due to wrong advise of consultant: HC Quashes Order of Cancellation of GSTN

The petitioner is a contractor engaged in providing construction services registered under the provisions of section 12 of the Act. It is his case that since he was out of business, the return after September, 2018 could not be filed. The person engaged by the petitioner also was under the impression that since outward supply is zero, there was no need for filing the return.

He was served with the show cause notice on 22.06.2020 under Rule 22 read with section 29(2)(c) of the Act to show cause as to why the registration be not cancelled, as he did not furnish the return for continuously six months’ period. The show cause notice was received on the portal. However, erstwhile consultant of the petitioner did not inform the petitioner of the same and he left the assignment around the same time for exploring better and other opportunities. The petitioner’s registration number was cancelled on 18.03.2021 with effect from the very date.

The petitioner preferred the appeal before respondent No.2 on 19.11.2021 under section 107 of the Act, where he had tendered written submissions and personal hearing also was made available to him through the video conference on 22.12.2021. The appeal was disposed of on 31.01.2022 with observation that it was obligatory on the part of the appellant to file all returns relating to the period in question upto the date of cancellation of registration. The petitioner has already filed the return starting from September, 2018 to March, 2021 along with the requisite late fees. By self-assessment, he has also paid the challans of Rs.2,94,520/- in March, 2022. He also made a representation on 19.04.2022 for restoration of the registration number on the ground that all the returns have been already filed. However, as no heed was paid, he is before this Court seeking to question and challenge the section.

The Court issued the notice and affidavit-in-reply is filed by one Mr. Anil Pandole, Assistant Commissioner, CGST Division-III. He has emphatically justified as to why GST registration of the petitioner has been canceled and that, according to him, is in accordance with the due procedure and following the measure of natural justice. He did not file the GST returns continuously for the period of 30 months. Moreover, the show cause notice issued to him on 22.06.2020 was not responded nor did he file any return in response to the same and, hence, his registration was cancelled. He also preferred the appeal and the same was rejected on 31.01.2022 on merits and, hence, he does not have any legitimate ground to sustain this petition. Relying on some of the provisions of the law, it is urged that the petition deserves dismissal.

In affidavit-in-rejoinder the petitioner has reiterated the details largely of the memo of petition.

Mr. Hiren Trivedi, learned advocate for the petitioner, has argued along the line of the memo of the petition and has urged that there is a keen urge on the part of the petitioner to get the registration revoked. After self-assessing, the petitioner has paid the amount of taxes and penalty and has also undertaken that whatever may be assessed by the authority, he shall be ready to also pay the same. Moreover, the consultant had not intimated him and that resulted into his not filing the returns. He has pleaded the Court to quash and set aside the order in original and the order of the appellate authority.

Mr. Priyank Lodha, learned Standing Counsel appearing for the respondent has vehemently submitted that if the petitioner is keen to continue his business, he ought to have been more vigilant. Not only there was no return filed, but, he has also not responded to the show cause notice issued nor has he filed any written submissions to the notice and both the authorities have concurrently held against him. He has also shown his apprehension that if the assessee is permitted to be lethargic in filing this and is permitted to also wake up from the slumber after a long time, it may prove to be deleterious for the system itself.

Observation of Court:

The Court made specific mention that the order for cancellation of registration dated 22.06.2020 is quite cryptic. It hardly gives any detail, which is otherwise necessary. The effective date of registration is 18.03.2021. It is understandable that the tax payer has not responded to the cancellation proceedings initiated by the respondent nor had he filed his due GST returns and the GSTIN, therefore, was cancelled under section 29(2) of the CGST Act.

The petitioner has already filed the returns from September, 2018 till March,2021. correspondingly, the challan of the late fee totaling to Rs.2.94 lakhs (rounded off) has been deposited by him after self-assessing himself. The petitioner has also pressed into service the decision of this Court in the case of Tahura Enterprise vs. Union of India, 2022 (4) TMI 751, where similar issue had arisen in which Central Board of Indirect Taxes and Customs had extended the time limit for revocation of cancellation during the Covid and the registration certificate, which was cancelled on account of non-filing of the return, had been revoked by this Court by certain directions. It was again the case where a person trading in the business of iron and steel scrap registered under the GST Act had not filed the returns nor had he made a full payment of the taxes due. The Court, after taking into consideration the period of Covid and also bearing in mind the extension of the time period by the Apex Court during the Covid-19 pandemic, had permitted the restoration of the registration by extending the time period and has also further directed him to continue his business by registration of certificate to have been restored.

Noticing the fact that the two grounds in the instant case have been putforth before this Court, firstly, the zero supply leading the petitioner to believe that he was not required to file the returns and secondly that his consultant had not advised him correctly both of which led to non-filing of the return, which now has been already filed. He has made payment of taxes with an undertaking of paying further taxes and to fulfill other legal obligations, subject to assessment being completed by the authority concerned.

We could notice that his non-filing of the GSTR-1 is one issue which reiteratively learned Standing Counsel has raised before us. Surprisingly when, it is an admitted fact that once having missed, the same cannot be done unless the cancellation of registration is revoked and the assessee is given an access to the portal. This, according to the learned Standing Counsel is necessary for the authority concerned to compare it with the return and adjudicate properly. Indisputably, the petitioner has ensured to also file the same for the period from March, 2018 to the year 2021 and till today. He has also ensured to furnish undertaking for the liability, if there arises any under the law. Under the circumstances, when all kinds of readiness is expressed, there is no reason as to why this Court should not permit at this stage, filing of GSTR-1. It is not only not going to prejudice the interest of revenue, but, on the contrary, would facilitate the process of adjudication with all the datas made available online.

It is for the period of pandemic which must not be lost sight of even though thankfully it is over by now and, therefore, the issue of limitation which the Apex Court had considered for extending the limitation shall also come to the rescue of the petitioner.

Moreover, the petitioner appears to be someone, who is keen to continue his business and the State’s obligation is to ensure the implementation of the law, but at the same time not to thwart, in any manner, the business prospects of the citizens and, therefore, acceding to the request, we are required to allow this petition quashing and setting aside the order of the appellate authority dated 31.01.2022 as well as order dated 18.03.2021 canceling the registration of the certificate of the petitioner and also the show cause notice dated 22.06.2020. The petitioner since has already paid the outstanding taxes, the penalty to the tune of Rs.2,94,520/- and the same being by self-assessment, he shall also file an undertaking before this Court to fulfill his obligations once the assessment is completed in eight weeks.

In view of the aforesaid, the order of cancellation of registration is quashed and set aside dated 18.03.2021 along with the order dated 31.01.2021. The respondent is directed to forthwith restore the registration of the petitioner. He shall also file his GSTR-1 within 15 days of the restoration. The authority, thereafter, in six weeks’ period, shall complete the assessment part. The petitioner shall cooperate in the process. Petition is disposed of in the above terms.

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