DECEMBER 07, 2022

By Vijay Kumar

HUNDREDS of writ petitions are filed in High Courts against the GST Department cancelling the registration of taxpayers, most often arbitrarily, without proper notice or reason. What does the Government achieve by cancelling the registrations of taxpayers?

What logic prevails with the GST officers that they want to cancel registrations and prevent the taxpayers from paying tax to the government?

In the Suguna Cutpiece Center case- 2022-TIOL-261-HC-MAD-GST, the Madras High Court made some very illuminating remarks, which richly deserve to be made part of the training material for GST officers. The High Court observed:

1. Cancellation of registration does not affect the liability of a person to pay tax and other dues under the Act or discharge any obligation under the Act and the rules for any period prior to the date of cancellation, whether or not such tax and other dues are determined before or after the date of cancellation.

2. The provisions of the Goods and Services Tax Act, 2017 cannot be interpreted in such a manner, so as to debar an assessee, either from obtaining registration or reviving the lapsed/cancelled registration, as such an interpretation would be not only contrary to Article 19(1)(g) of the Constitution of India but also in violation of Article 14 and Article 21 of the Constitution.

3. No useful purpose will be served by keeping these petitioners (taxpayers) out of the bounds of GST regime other than to allow further leakage of the revenue and to isolate these petitioners from the main stream contrary to the objects of the GST enactments.

4. The purpose of GST registration is only to ensure just tax gets collected on supplies of goods or services or both and is paid to the exchequer. Keeping these petitioners outside the bounds of the GST regime is a self-defeating move as no tax will get paid on the supplies of these petitioners.

5. May be, organised companies who comply with the requirement of GST enactments may not do business with these petitioners. However, by keeping the petitioners out of the bounds of GST law, purpose of the Act will not be achieved.

6. It will also not mean that the petitioners will not do business in the unorganised sector. They will still do their business, may be surreptitiously and clandestinely.

7. They may perhaps not get opportunity to supply goods or services to established players. They may still supply to smaller players who may not be keen on GST compliance by the petitioners.

8. Not allowing the petitioners to revive their registration is to de-recognise a whole lot of entrepreneurs and to not collect GST at all from them.

9. It will only strain the system, as these petitioners will continue to carry on their business and supply goods and services and/or end up not paying the GST under the respective GST enactments. It will lead to loss of revenue to the Government which is not intended when these enactments were enacted.

10. There are adequate safeguards under the GST enactments which can also be pressed against these petitioners even if their registration are revived so that, there is no abuse by these petitioners and there is enough deterrence against default in either paying tax or in complying with the procedures of filing returns.

11. Further, the Government requires tax to meet its expenditure. By not bringing these petitioners within the GST fold, unintended privilege may be conferred on these petitioners unfairly to not pay GST should they end up supplying goods and/or services without registration. For example, a person renting out an immoveable property will continue to supply such service irrespective of registration or not.

12. Therefore, if such a person is not allowed to revive the registration, the GST will not be paid, unless of course, the recipient is liable to pay tax on reverse charge basis. The ultimate goal under the GST regime will stand defeated. Therefore, these petitioners deserve a right to come back into the GST fold and carry on their trade and business in a legitimate manner.

13. The provisions of the GST Enactments and the Rules made thereunder read with various clarifications issued by the Central Government pursuant to the decision of the GST Council and the Notification issued thereunder also make it clear, intention is to only facilitate and not to debar and derecognise assessees from coming back into the GST fold.

14. Since, no useful purpose will be served by not allowing persons like the petitioners to revive their registration and integrate them back into the main stream, I am of the view that the impugned orders are liable to be quashed with a few safeguards.

The High Court was not deciding on rocket science; these are elementary principles which any government officer concerned with collecting Revenue for the government should be aware of and concerned with. Why is it that they don't understand simple features about their department which the High Court easily understands?

Look at this case:

The petitioner is the proprietor of Lucky Mydeen Briyani. He engaged a private accountant for the purpose of filing returns and he alone had access to the GST portal for filing returns. During the Covid-19 Pandemic, the business was shut down as people showed a remarkably low inclination to eat biryani in restaurants and pay GST thereon. Added to this, the petitioner also fell ill. Hence, he was unable to contact the accountant and file his returns.

During the second week of August 2022, when the private accountant accessed the GSTN, the petitioner came to know that the registration was cancelled by an order dated 04.01.2022. The petitioner attempted to file a representation online to revoke the cancellation of registration. The same was not accepted, since the request for revocation was not filed within the statutory limitation of 90 days.

The Government's Counsel told the Court that the petitioner has an appeal remedy before the Appellate Authority and the petitioner failed to file an appeal but directly approached the High Court. Hence, he prayed for dismissal of the writ petition. Pray, what would happen if the petition is dismissed and he if he files an appeal now? It would be dismissed as time barred; means that he is not entitled for revocation of his registration for life! Should he or will he stop selling biryani? Who loses? Now that people seem to show a little more interest in paying GST by eating biryani.

Fortunately, the High Court allowed the writ petition. - 2022-TIOL-1168-HC-MAD-GST

This is not something new. In January 2018, the Department cancelled the registration of a taxpayer. In an order dated August 06, 2018, the Orissa High Court observed, - 2018-TIOL-2879-HC-ORISSA-GST:

1. It is essential for the Commissioner as well as his colleagues to understand that any impediment caused to registered dealers in carrying on their business will also have a direct impact on the collection of revenue for the State. Therefore, action in this regard would be in the interest of all.

2. The Officers cannot throw their hands in desperation and blame the computer or the failure of uploading and consequently lead to cancellation of registration. This is neither in the interest of the State nor of the dealer.

When they want to cancel the registration, they do it immediately, sometimes even without a notice as it happened in this case:

The petitioner approached the High Court challenging the order cancelling the Registration. It is the case of the petitioner that the provisions of Section 29 r/w Rule 22 of the CGST/SGST Rules clearly indicate that the petitioner was entitled to a show cause notice before an order or cancellation is issued and no such notice was issued.

The Government Counsel very fairly admitted that a show cause notice has not been issued to the petitioner. It was submitted that the necessary notice ought to have been automatically generated. However, she submitted that without standing on technicalities, the matter can be remitted to the 1st respondent for considering the case of the petitioner.

And the High Court did that.

Why should a taxpayer be made to approach the High Court because some careless officer failed to issue a notice? (WESTERN OFFSHORE & MARINE PROJECTS PVT. LTD - 2022-TIOL-1514-HC-KERALA-GST)

But if the taxpayer wants to cancel his registration, the matter is altogether different as it happened in this case: Rakesh Kumar Garg - 2022-TIOL-181-HC-DEL-GST

Petitioner sought the cancellation of his registration on account of his inability to continue his business due to his deteriorating health. The Assistant Commissioner in order dated 15th September, 2020 instead of accepting the request of the petitioner, cancelled the GSTIN of the petitioner on suo-moto basis under Section 29(2) of the Act from the date of registration of GSTIN of the Petitioner i.e. 1st July, 2017.

The sick petitioner had to approach, not only the appellate authority but also the High Court to get relief.

How complicated you can make a simple and good tax!

Until Next week