Allahabad HC: Revokes Order of Cancellation of Registration and condemns the callous attitude of the Department

The Hon'ble Allahabad High Court in the matter of Ansari Construction vs. Additional Commissioner, CGST(Appeals)& Ors. [Writ Tax No. 626 of 2020 dated November 24, 2020]set aside ex-parte order seeking to cancel assessee's registration for failure to file return for continuous 6 months as well as the order dismissing revocation application and affirming cancellation of registration and noted that the assessee had filed all returns and cleared all dues.   Further, ordered the Assistant Commissioner to pay a cost of Rs. 10,000/- from his own salary for unnecessarily harassing the assessee.

Facts

Ansari Construction ("Petitioner") is a proprietorship firm, engaged in the business of providing constructions services, who was served Show Cause Notice ("SCN") dated November 21, 2019 by the Assistant Commissioner ("Respondent No. 2") proposing to cancel the registration certificate of the Petitioner mainly on the ground that the petitioner has failed to file the return for a continuous period of 6 months. In pursuance of the said notice, an ex-parte order was passed on November 30, 2019 cancelling the registration of the Petitioner by invoking the powers under Section 29(2)(5) of Central Goods and Services Tax, 2017 ("CGST Act").

The Petitioner filed an application on December 19, 2019 under Section 13 of CGST Act for revocation of cancellation of registration on the ground that the Petitioner had submitted all the pending returns under GSTR-3B and GSTR-1 and, thus, the entire tax liability stood clear with the late fees.

In response to the application filed by the petitioner, the Respondent No. 2 issued a SCN on December 29, 2019 calling upon the Petitioner to show cause on the reason of furnishing a reply to the notice, failing which the application of the Petitioner shall be decided on ex-parte on the basis of the available records on merits. Despite the Petitioner having replied, the Respondent No. 2, vide Order in Original dated January 30, 2020 ("OIO"), rejected the application for revocation of registration.

Aggrieved against the said order, the Petitioner preferred an appeal before the Appellate Authority, ("Respondent No.1") which was dismissed and affirmed the order of Respondent no. 2, vide its Order in Appeal dated July 6, 2020 ("OIA"), and relied upon mail issued by a division office to the effect that taxpayer did not upload any documents online while replying to the query and as the petitioner had simply stated that all the liabilities have been cleared by them even they have not disclosed as to on what date they filed return and did not enclose the copy filed by them and the tax payer simply made claims without producing proper evidence which cannot be verified by the division office at this stage. Aggrieved by the order of the Appellate Authority, this present writ petition has been filed.

Issue

Whether the Respondents were correct in rejecting the application for revocation of cancellation of registration and affirming the OIO, despite the requisite documents evidencing the filing of returns as well as the tax and late fees was submitted?

Held

The Hon'ble Allahabad High Court in the case of Writ Tax No. 626 of 2020 dated, November 24, 2020held as under:

• Section 29 (2)(c) of CGST Act clearly provides for cancellation of registration if the assessee fails to furnish the returns for a continuous period of six months and invoking the said clause, the registration of the Petitioner was cancelled as on November 30, 2019.
• Section 30 of the CGST Act provides a remedy to the person whose registration has been cancelled and in terms of the remedy so provided the Petitioner approached the authority for revocation of the registration within the times specified therein. In terms of the proviso to Rule 23(1) a burden is cast upon the assessee to furnish returns and to ensure that the tax dues is paid along with any due interest penalty and late fees and no further burden is cast upon the assessee or the persons seeking revocation.
• In the present case along with the application, the Petitioner had filed a statement to the effect that all the requisite returns have been filed and the dues are cleared and thus it was incumbent upon the Department to have verified the correctness of averments made in the application.
• The Court noted that the taxpayer has filed GSTR-3B upto November 2019 and further there are no dues pending towards tax, late fee, interest upto November 2019 and there are no dues of taxpayer pending upto November 2019.
• Stated that, the Department has miserably failed to verify the facts from their own records and proceeded to issue a SCN. The manner in which the SCN has been issued is wholly unacceptable as it does not record any shortcoming on the part of the Petitioner. It is not conceivable as to what was required in the SCN and it clearly highlights the fact that serious quasi-adjudicatory functionaries are being discharged by persons who do not have a legally trained mind and are entrusted in discharging functions affecting huge revenues.
• Condemns the callous manner of the Respondents in which the Petitioner has been harassed by approaching one forum after the other and wasting his considerable financial resources as well as time. Further, the Court stated that, the OIO passed by the Respondent No. 2 rejecting the application of the Petitioner is wholly arbitrary and demonstrates the lack of legally trained mind as there appears to be no effort to verify the correctness of the assertions made by the Petitioner at the end of the Department. Even, the Appellate Authority has also committed the same manifest arbitrariness in deciding the appeal, the recording of the reason that facts cannot be verified at the appellate level is wholly arbitrary and militates against the whole purpose of statutory appeal under an enactment. The Court cannot overlook the mutually contradictory stands taken by the Department before the Appellate Authority on one hand and the instructions given to this Court
• Held that, now the Department has accepted that the returns were filed within time and no dues remain payable, the order passed by Respondent No. 2 as well as the appellate order deserves to be set aside with a direction to allow the application for revocation of registration filed by the petitioner. Consequently, revokes the order cancelling the registration. And in view of the specific findings recorded to the effect that the petitioner was unnecessarily harassed, the Court ordered Respondent No. 2, a cost of Rs. 10,000/- to be paid to the Petitioner within 30 days from his own salary.

Relevant provisions

Section 29(2)(c) of the CGST Act

"29. Cancellation of registration-

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,– (c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or……"

Rule 23(1) of the Central Goods and Services Tax Rules, 2017:

"23. Revocation of cancellation of registration.-

(1) A registered person, whose registration is cancelled by the proper officer on his own motion, may submit an application for revocation of cancellation of registration, in FORM GST REG-21, to such proper officer, within a period of thirty days from the date of the service of the order of cancellation of registration at the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

Provided that no application for revocation shall be filed, if the registration has been cancelled for the failure of the registered person to furnish returns, unless such returns are furnished and any amount due as tax, in terms of such returns, has been paid along with any amount payable towards interest, penalty and late fee in respect of the said returns."