Facts:
M/s Phoenix Rubbers (“Petitioner”) has filed a Civil Writ Petition in the Hon’ble Kerala High Court (“Kerala HC”). The Petitioner is an assessee of GST in the roll of THE SUPERINTENDENT PALAKKAD SOUTH RANGE (“Respondent No. 4”) and has defaulted in filing of returns from May 2019 onwards on account of financial crises. Thereupon, the Respondent No. 4 had issued a notice dated January 13, 2019 proposing to cancel the registration u/s 29(2)(c) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) due to alleged non filing of returns for a continuous six month period. Thereafter, the Respondent No. 4 has passed an order for the cancellation of the registration of the Petitioner’s firm. The Petitioner urged that even though the Respondent No. 4 found that as on the date of the notice dated November 13th, 2019 there were six months of continued default but there indeed was only 5 months of continued default and not the mandatory six months.
Therefore, the order is illegal as well as ultra vires and liable to be quashed. Further the order directing cancellation of the registration of the Petitioner was rendered on December 10th, 2019 and that on December 10th, 2019, the Petitioner had filed returns for the month of May 2019 as can be seen on the document attached by the Petitioner.
Issue involved:
Whether the order for cancellation of registration is liable to quashed in cases where the continuous default is for a period less than 6 months?
Held:
The Hon’ble Kerala HC passed the following ruling in the matter of W.P.(C).No. 35159/19 dated February 3rd, 2020:
- A combined reading of the provisions would clearly indicate that an assessee is bound to file return for the month concerned on or before the 20th of the succeeding month concerned. Further Section 29(2)(c) of the CGST Act discloses that it is mandated by the Legislature that if there is a continuous six months default on the part of the assessee in filing returns, then the competent authority can invoke power u/s 29(2)(c) of the CGST Act to cancel the registration.
- The Respondents were directed to ascertain the correctness of the details as to whether the Petitioner had indeed filed the returns for the month of May 2019 on December 10th, 2019 to which the Respondents do not have any serious dispute that as on the date of issuance of the notice on November 13th, 2019, there was indeed six months continuous default on the part of the Petitioner in filing the returns. Therefore, the basic jurisdictional fact for issuing a show-cause notice has been correctly and properly done by Respondent No. 4.
- It appears that the Petitioner has filed the return for the month of May 2019 on December 10th, 2019 @ 11:30 am as can be seen from the series of documents submitted by the Petitioner when the Respondent No. 4 has passed the order on the same date i.e. December 10th, 2019. Since filing of return has been done online hence the Respondent No. 4 cannot be blamed for not knowing that the Petitioner has filed the return on the same date on which the order has been passed. Moreover, the Petitioner has not informed the Respondent No. 4 either on December 10th, 2019 or immediately thereafter about the crucial fact that the Petitioner has indeed filed the returns for the month of May 2019 on December 10th, 2019.
- But the fact of the matter is that since the Petitioner had indeed filed the return for the month of May 2019 on December 10th, 2019 hence the Petitioner had only 5 months continuous default on the date of the order and not the mandatory 6 months default which is the essential jurisdictional fact required for invoking of power of cancellation of registration u/s 29(2)(c) of the CGST Act.
- This Court would certainly say that the Respondent No. 4 cannot be faulted for having passed the order on December 10th, 2019 because he was totally unaware that the Petitioner would indeed file the return for the month of May 2019 on December 10th, 2019.
The Hon’ble Kerala HC conclusively ruled that the requirement as to six months continuous default of non-filing of returns must be present at both the stages viz. issuance of notice & passing of final order. Since the requirement is unfulfilled at the stage when the order has been passed hence the order is liable to be quashed and set aside.
Important Provisions:
Section 29(2)(c) of the CGST Act, 2017 : Cancellation or suspension 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
Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.
Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.