M/S Lal Bahadur Yadav vs Union Of India on 29 August, 2024

1. Outcome
The High Court of Judicature at Patna dismissed both writ petitions (Civil Writ Jurisdiction Case No.11874 of 2024 and Civil Writ Jurisdiction Case No. 11941 of 2024), upholding the cancellation of GST registration and the dismissal of the appeals on grounds of delay. The constitutional challenge to Section 29(2) of the CGST/BGST Acts was also rejected.

2. Core Issue
The core issues before the Court were:
a. Whether the cancellation of GST registration for non-filing of returns, and the subsequent dismissal of appeals against such cancellations due to gross delay, warranted interference under Article 226 of the Constitution of India.
b. Whether Section 29(2) of the Central Goods and Services Tax Act, 2017 and Bihar State Goods and Services Tax Act, 2017, which provides for cancellation of registration, violates the fundamental rights to carry on trade, occupation, or business under Article 19(1)(g) and livelihood under Article 21 of the Constitution.

3. Key Facts
* Petitioners: M/s Vaibhav Gopal Construction Private Limited (CWJC 11874/2024) and M/S Lal Bahadur Yadav (CWJC 11941/2024), both registered under CGST and BGST Acts.
* Cancellation Orders:
* M/s Vaibhav Gopal Construction: Registration cancelled on 15.01.2021 (following SCN on 05.01.2021) for non-filing of returns.
* M/S Lal Bahadur Yadav: Registration cancelled on 14.01.2021 (following SCN on 28.12.2020) for non-filing of returns for a consecutive six months.
* Reasons for Delay in Appeal (M/s Vaibhav Gopal Construction): Director claimed family distress during the pandemic (multiple deaths of in-laws and father between March 2020 and June 2021), withdrawal from business, reliance on a tax consultant who failed to ensure compliance, and unawareness of the cancellation until deciding to restart business.
* Appeal Filing & Rejection:
* M/s Vaibhav Gopal Construction: The appeal was filed (date not precisely stated but implied before rejection) and subsequently rejected on 16.04.2024 on grounds of gross delay. The court noted that the appeal was filed approximately two years after the Supreme Court's extended limitation period expired (which was 31.05.2022). Petitioner later deposited Rs. 27,36,058/- and filed pending returns.
* M/S Lal Bahadur Yadav: Appeal filed on 30.04.2024, rejected on grounds of delay. The court noted this was approximately three years and one month after the Supreme Court's extended limitation period expired. Petitioner claimed unawareness of Circular No. 3 of 2023.
* Missed Opportunities: Both petitioners failed to avail:
* The extended limitation period granted by the Supreme Court (up to 31.05.2022).
* The Amnesty Scheme (Circular No. 3 of 2023) for restoration of cancelled registrations, available from 31.03.2023 to 31.08.2023.

4. Arguments
* Taxpayer (Petitioners):
* The cancellation of registration, particularly given the personal hardships (in one case) and the pandemic period, was arbitrary and unjust.
* Dismissal of delayed appeals was harsh and ignored genuine reasons for delay.
* Section 29(2) of the GST Acts is unconstitutional as it imposes an unreasonable restriction, even amounting to a prohibition, on the fundamental right to carry on trade/business (Article 19(1)(g)) and livelihood (Article 21), leading to the extinction of business and loss of goodwill.
* Reliance was placed on the Bombay High Court decision in Rohit Enterprises vs. Commissioner, Aurangabad & Ors. for similar circumstances.
* The argument of mens rea was also raised in one case, implying no fraudulent intent.
* Revenue (Respondents - implicit through court's reasoning):
* Petitioners failed to adhere to statutory timelines for appeals and revocation of cancellation.
* The Supreme Court's general extension of limitation and the specific Amnesty Scheme provided ample opportunities, which were not utilized.
* Cancellation under Section 29(2) is a valid consequence of non-compliance with tax laws (e.g., non-filing of returns).
* The constitutional challenge is a "last-ditch effort" after exhausting other remedies or failing to pursue them diligently.
* Cancellation of registration does not permanently bar one from business; a fresh registration can be sought.

5. Court’s Reasoning
* Delay in Appeals: The Court found the appeals were filed with excessive delays, significantly beyond both the statutory period (Section 107) and the extended limitation period granted by the Supreme Court (Suo Motu Writ Petition (C) No. 3 of 2020), as well as the Amnesty Scheme. No satisfactory reasons were provided for such prolonged delays. The Court refused to invoke its discretionary power under Article 226 to condone such gross delays.
* Constitutional Validity of Section 29(2):
* The Court held that the constitutional challenge was an "after thought" and a "last-ditch effort" to circumvent the petitioners' failure to avail statutory remedies.
* The Court disagreed with the Bombay High Court's view in Rohit Enterprises, stating that Rohit Enterprises only exercised discretion under Article 226 based on its specific facts and did not lay down a binding declaration of law concerning unconditional constitutional guarantees.
* Article 19(1)(g) is subject to reasonable restrictions under Article 19(2). Taxing statutes, enacted under Articles 245, 246, and 265, necessarily impose obligations like registration and compliance. The power to grant registration inherently includes the power to cancel it for non-compliance (Section 29(2)).
* Referring to the Constitution Bench decision in M.A. Rahman and Others vs. The State of Andhra Pradesh, the Court affirmed that cancellation of registration for non-payment of tax or non-compliance is a reasonable restriction on the right to carry on business. Even if it results in the "extinction of business," it serves the public interest of revenue collection, which is necessary for state administration.
* The argument that "goodwill" would be lost was not persuasive, as cancellation does not preclude an application for fresh registration.
* The argument of mens rea was dismissed as the ground for cancellation was undisputed non-filing of returns.
* Discretionary Power: The Court found no reason to exercise its extraordinary discretionary power under Article 226 to interfere with orders clearly within statutory boundaries, especially given the petitioners' lack of diligence in pursuing available remedies.

6. Statutory References
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 29(2) (Cancellation of registration)
* Section 30 (Revocation of cancellation of registration)
* Section 107 (Appeals)
* Bihar State Goods and Services Tax Act, 2017 (BGST Act):
* Section 29(2)
* Section 30
* Section 107
* Constitution of India:
* Article 19(1)(g) (Freedom to practice any profession, or to carry on any occupation, trade or business)
* Article 19(2) (Restrictions on Article 19(1)(g))
* Article 21 (Protection of life and personal liberty)
* Article 226 (Power of High Courts to issue certain writs)
* Article 245 (Extent of laws made by Parliament and by the Legislatures of States)
* Article 246 (Subject-matter of laws made by Parliament and by the Legislatures of States)
* Article 265 (Taxes not to be imposed save by authority of law)
* Circular No. 3 of 2023 (Amnesty Scheme)

7. Precedents Cited
* Rohit Enterprises vs. Commissioner, Aurangabad & Ors.; (2024) 124 GSTR 503 (Bombay High Court) – Disagreed with by the Patna High Court, noting its persuasive effect only.
* Suo Motu Writ Petition (C) No. 3 of 2020, In Re: Cognizance For Extension of Limitation (Hon'ble Supreme Court) – Referred to for the extended limitation period during the pandemic.
* M.A. Rahman and Others vs. The State of Andhra Pradesh; 1962 SCR 694 (Constitution Bench, Hon'ble Supreme Court) – Relied upon by the Patna High Court to uphold the validity of cancellation provisions.
* Narendra Kumar v. The Union an of India (1) – Cited within M.A. Rahman judgment, on the interpretation of "restriction" including "prohibition" under Article 19.