Interest And Late Fee Must Be Paid For Revocation Of GST Registration Cancellation: GSTAT Hyderabad

The GST Appellate Tribunal at Hyderabad (GSTAT), on 6 November held that taxpayers seeking revocation of GST registration cancellation for non-filing of returns must pay applicable interest and late fee in addition to the outstanding tax.

A Bench comprising Judicial Member A P Ravi and Technical Member Duvvuri Krishna Srinivas allowed an appeal filed by the department against the First Appellate Authority's order dated 31 August 2021, which had revoked the cancellation of registration of Sri Umamaheshwara Infratech. It observed:

“While the Respondent had admittedly paid the tax alone and filed the returns, the Appellants were at the liberty to collect the interest and late-fee as per existing provisions i.e. Section 50 and Section 47 of Act, respectively. Further as provided in Rule 23 the respondent is liable in addition to the above, for penalty. Accordingly, we deem it appropriate to impose a penalty of ₹10,000/- under Rule 23 of the Rules.”

Sri Umamaheshwara Infratech, engaged in infrastructure development, had defaulted in filing its GSTR-3B returns for a continuous period of six months. Following a show cause notice issued on 9 January 2020, the Proper Officer cancelled its GST registration with effect from 16 August 2020.

Subsequently, the taxpayer approached the First Appellate Authority, submitting that it had filed the pending returns and paid the tax after receiving the show cause notice. The authority allowed the appeal and revoked the cancellation, directing the Proper Officer to verify the taxpayer's claim regarding the filing of returns and payment of tax.

The department challenged this order, contending that the First Appellate Authority had failed to ensure payment of applicable interest, penalty and late fee as required under the proviso to Rule 23(1) of the CGST Rules. It argued that registration could not be restored merely upon verification of tax payment and filing of returns.

The Tribunal examined Rule 23(1), which provides that where registration has been cancelled for failure to furnish returns, an application for revocation cannot be filed unless the pending returns are furnished and the tax due, along with applicable interest, penalty and late fee, is paid.

It observed that the First Appellate Authority had considered only the payment of tax and filing of returns, without adequately accounting for the other statutory requirements under Rule 23(1). It held that the applicable interest, late fee and penalty could not be disregarded while considering revocation of cancellation.

Further, the Bench observed that the department was at liberty to recover the applicable interest under Section 50 and late fee under Section 47 of the CGST Act. It also held that the taxpayer was liable to pay a penalty under Rule 23 and quantified it at Rs. 10,000. It concluded:

“In view of the foregoing discussion, we hold that the FAA had erred in ignoring the provisions of Rule 23(1) of the Rules, which necessitates that interest, penalty and late fee also be paid consequent to the payment of admitted tax liabilities. Therefore, the order impugned is held to be modified to that extent.”

Accordingly, the GSTAT allowed the department's appeal and modified the First Appellate Authority's order to require payment of applicable interest, late fee and a penalty of Rs. 10,000.

Counsel for Appellant: K. Sai Prasad, Superintendent, Hyderabad GST, and Ram Subba Reddy