No Late fees to be charged if returns not filed due to cancellation of GST registration, which was restored subsequently

The Calcutta High Court has ruled that businesses should not be charged late fees for failing to file GST returns if the non-filing was due to their GST registration being cancelled on incorrect grounds. The court found that demanding late fees in such cases is unlawful, especially when the registration was later restored. The Revenue Department has been directed to assist businesses in filing their returns without incurring these late fees.

The Hon'ble Calcutta High Court in M/s. Modicum Enterprise (OPC) Private Limited v. Deputy Commissioner of State Tax/Assistant Commissioner of State Tax [M.A.T No. 1828 of 2022 with I.A. No. CAN 1 of 2022 dated December 22, 2022] has held that the assessee cannot be penalised by demanding late fee under Section 47 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") where, the assessee had not filed returns due to the cancellation of its Goods and Services Tax ("GST") Registration on the factually incorrect grounds.Further held that, the demand of late fee from the assessee is without jurisdiction and not tenable in the eye of law. Directed the Revenue Department to facilitate the process of filing of return, without the payment of late fee.

Facts

M/s. Modicum Enterprise (OPC) Private Limited ("the Appellant") was a registered dealer under the provisions of the CGST Act whose, GST Registration was cancelled by the Revenue Department ("the Respondent") on the ground that it was a non-existing dealer. The Appellant preferred an appeal before Appellate Authority, which was allowed by an order dated July 22, 2022 ("the Appellate Order") wherein, it was held that the cancellation of Petitioner's GST Registration was incorrect. Subsequently, the cancellation of GST Registration was revoked and restored. 

However, when the Appellant attempted to file returns, there was a demand of INR 5,000/- per return as late fee payable under Section 47 of the CGST Act, against which, the Appellant filed a petition wherein, the learned Single Judge vide order dated September 28, 2022 ("the Impugned Order"), declined to grant interim order to the Appellant. 

Being aggrieved, this intra-court appeal has been filed.  

Issue

Whether the late fee can be demanded from the Appellant under Section 47 of the CGST Act?

Held

The Hon'ble Calcutta High Court in M.A.T No. 1828 of 2022 with I.A. No. CAN 1 of 2022 held as under:

• Analysed Section 47 of the CGST Act and noted that, the provision deals with a person, who fails to furnish the returns either under Section 39 or Section 45 or Section 44. 
• Observed that, the Respondent did not state that the Appellant had failed to furnish its return within due date however, the reason for non-furnishing of returns was the cancellation of GST Registration on the ground that the Appellant is a non-existing dealer. 
• Noted that, the cancellation of Appellant's GST Registration was restored by the Appellate Authority on the grounds that order was passed on a factually incorrect premise.Hence, the Appellant cannot be penalised by demanding late fee and Section 47 of the CGST Act cannot be attracted.
• Held that, the demand of late fee of INR 5,000/- per return from the Appellant is without jurisdiction and not tenable in the eye of law.
• Restrained the Respondent from demanding any late fee from the Appellant in respect of the returns, which the Appellant intend to file.
• Directed the Respondent to render necessary assistance to the Appellant to facilitate the process of filing of return, so that the Appellant will be able to file the return without the payment of late fee within the period of three weeks.
• Further directed the Respondent not to initiate any fresh proceeding for cancellation of the GST Registration on the ground of non-filing of the return. 

Relevant Provisions

Section 47 of the CGST Act

"Levy of late fee. –  

(1) Any registered person who fails to furnish the details of outward supplies required under section 37 or returns required under section 39 or section 45 or section 52 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.(2) Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent. of his turnover in the State or Union territory."