M/S Sambhaji Multi Services Through Its ... vs The Commissioner State Gst Bhavan And ... on 8 July, 2024

1. Outcome

The Writ Petition was partly allowed. The Bombay High Court (Aurangabad Bench) quashed and set aside the Appellate Authority's order dated 18.12.2023 (refusing to condone delay) and the State Tax Officer's cancellation order dated 23.01.2023. The proceedings were remitted back to the State Tax Officer for a fresh hearing and order, subject to the Petitioner depositing costs of Rs. 5,000/- with the Authority by 01.08.2024 and appearing before the Authority with the required tax returns on the same date. The Authority is directed to complete the exercise within 45 days.

2. Core Issue

The core issue was whether the cancellation of a GST registration for non-filing of returns, followed by the dismissal of a delayed appeal due to the Appellate Authority's lack of power to condone delay, should be set aside by the High Court in its writ jurisdiction, allowing the taxpayer to rectify the non-compliance and continue business, especially when the initial default had an explanation (Covid-19 related health issues of the accountant).

3. Key Facts

• M/s Sambhaji Multi Services, a recovering agent for banks, was registered under the CGST and MGST Acts.
• The Petitioner's GST registration (No. 27BWPPS0340K1Z4) was cancelled by the State Tax Officer via an order dated 23.01.2023, effective from 01.01.2022.
• The sole reason for cancellation was the failure to submit tax returns for six consecutive months, despite a show cause notice (GST REG-31) issued on 11.08.2022.
• The Petitioner admitted that no reply was filed to the show cause notice because his accountant was suffering from Covid-19 related health issues.
• The cancellation order indicated a 'NIL' demand from the Petitioner, and the Petitioner stated he conducted no business post-cancellation.
• The Petitioner filed an appeal against the cancellation, which was dismissed by the Deputy Commissioner (Appeals) on 18.12.2023, solely on the ground of delay, as the Appellate Authority admittedly lacked jurisdiction to condone the delay.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Petitioner):
  • Conceded that the Appellate Authority lacked jurisdiction to condone the delay, but sought challenge to the original cancellation order under the High Court's writ jurisdiction.
  • Argued that his services fall under the Reverse Charge Mechanism (RCM), implying that the tax payable would be 'NIL' even if returns were filed, though returns remain mandatory.
  • Attributed the non-filing of returns to his accountant's Covid-19 illness, highlighting the severe restrictions and difficulties during the pandemic.
  • Relied on precedents to argue that the government's intention is not to curtail an individual's right to conduct business and that revocation of cancellation should be permitted rather than forcing a fresh registration, especially given the procedural lapse.
  • Highlighted Section 30 of the CGST Act which provides for revocation of cancellation.
• Revenue (Respondents):
  • Relied on an affidavit in reply, contending that the Appellate Authority's order refusing to condone delay was legally sound, given its lack of jurisdiction.
  • Cited a Madras High Court judgment to suggest that the Petitioner could apply for a fresh GST registration as an alternative remedy.

5. Court’s Reasoning

• The Court accepted the admitted fact that the Appellate Authority lacked jurisdiction to condone the delay, thus the order refusing to condone delay could not be faulted. However, it held that the High Court, in its writ jurisdiction, could examine the validity of the original cancellation order.
• The Court noted the Petitioner's explanation for non-filing (Accountant's Covid-19 illness) and recognized the severe conditions during the pandemic, treating it as a valid extenuating circumstance.
• Citing M/s SMT Ready Mix Concrete (Madras High Court) and Rohit Enterprises (Bombay High Court), the Court emphasized that the purpose of GST law is not to curtail the right to conduct business but to ensure tax compliance. Keeping the Petitioner out of the GST regime for procedural lapses, especially when the tax liability might be NIL, would be "purposeless."
• The Court found that granting an opportunity for re-hearing, as supported by Sanjeev Suresh Desai (Bombay High Court), where the initial order was due to non-submission of documents or non-appearance, would meet the ends of justice.
• It also referenced Section 30 of the CGST Act, which allows for the revocation of cancellation, indicating a statutory mechanism for relief.
• Considering the Petitioner's lapse, the Court deemed it appropriate to impose a token cost of Rs. 5,000/-.

6. Statutory References

• Maharashtra Shops and Establishments Act
• Central Goods and Service Tax Act, 2017
• Maharashtra State Goods and Service Tax Act, 2017
• Section 29 of the GST Act, specifically Section 29(2)
• Section 30 of the Central Goods and Service Tax Act
• Union Territory Goods and Services Tax Act (mentioned in Section 30 excerpt)
• Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996
• Section 12A of the Commercial Courts Act, 2015
• Provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881

7. Precedents Cited

• Rohit Enterprises Vs. the Commissioner State GST and others, Writ Petition No.11833/2022 (Bombay High Court, 16.02.2023): Cited for the principle that the Government cannot curtail an individual's right to conduct business.
• M/s SMT Ready Mix Concrete vs. Additional Commissioner and another, Writ Petition Nos.28249 and 27773/2023 (Madras High Court, 08.12.2023): Cited for the view that the intention of the Government is not to curtail business rights, and it would be purposeless to keep a petitioner out of the GST Act for procedural lapses, suggesting that revocation of cancellation should be permitted. This judgment, in turn, relied on:
  • Miscellaneous Application No.665/2021 in SMW (C) No.3/2020), (2021) 18 SCC 250 : 2021 SCC Online SC 949 (Honourable Supreme Court): Cited for the exclusion of limitation periods during the Covid-19 pandemic.
• Hemasri Enterprises Vs. Appellate Authority and another, Writ Petition No.32877/2022 (Madras High Court, 07.12.2022): Cited by the AGP, where the petitioner was permitted to apply for fresh GST registration.
• Sanjeev Suresh Desai Vs. Union of India and others, Writ Petitions No.2876 and 2891/2021 (Bombay High Court, Principal Seat, 24.06.2024): Cited for the principle that if an order by the First Authority is passed due to non-tender of documents or non-appearance, an opportunity for re-hearing should be granted.