Patna High Court Says Permanent GST Registration Cancellation May Cause 'Civil Death' To Business

The Patna High Court on 28 August observed that permanent cancellation of GST registration may virtually result in the “civil death” of a business by preventing the taxpayer from carrying on business, while granting relief to Super Enterprises, whose GST registration was cancelled for failure to file returns for six months.

A Division Bench of Justices Rajeev Ranjan Prasad and Ramesh Chand Malviya noted that Section 75(4) of the Bihar Goods and Services Tax Act, 2017, requires the authorities to provide an effective opportunity of hearing before taking an adverse decision. It observed:

“When no show cause was filed within the given period of 30 days, thereafter, a date of hearing was required to be fixed or in case of filing of the show cause, if the authorities would not have been satisfied with the plea taken in the show cause and an adverse order would have been contemplated then in that case also, a date for hearing was required to be fixed.”

Super Enterprises approached the High Court challenging the cancellation of its GST registration and the appellate authority's order dismissing its appeal solely on the ground of limitation.

The taxpayer submitted that it had regularly filed its GST returns but could not manage its business affairs due to unavoidable circumstances and illness, resulting in a six-month delay in filing returns. It also submitted that its consultant had failed to inform it about the show cause notice uploaded on the GST portal.

The authorities subsequently cancelled the registration through an ex-parte order dated 22 April 2024. Super Enterprises thereafter filed its GSTR-3B and GSTR-1 returns and cleared the pending tax dues along with late fee and penalty.

The Court particularly noted that the show cause notice dated 6 February 2024 granted 30 days to the taxpayer to submit its reply, but fixed the personal hearing for 5 March 2024, before expiry of the period available for filing the reply. It held that, in these circumstances, fixing the hearing date amounted merely to an “empty formality”.

The Revenue opposed the petition, submitting that Super Enterprises had earlier also received show cause notices for cancellation of registration and had failed to file returns after June 2023. It argued that sufficient opportunity had been provided and that the appeal was rightly dismissed as time-barred.

Relying on its earlier decision in Galaxy Heights v. Union of India & Ors., the Bench reiterated that permanent cancellation of GST registration is likely to inflict “civil death” on a taxpayer's livelihood, as the person would no longer be in a position to carry on business.

Accordingly, the High Court set aside the appellate order and granted Super Enterprises three weeks to approach the competent authority for revocation of the cancellation of its GST registration. If the application is filed within the stipulated period, the authority shall consider it on merits and shall not reject it merely on the ground of limitation. It also directed the authority to decide the application within two months.

For the Petitioner: Anurag Saurav, Advocate; Abhishek Dubey, Advocate

For CGST: Sriram Krishna, Senior Standing Counsel

For the State: Rewti Kant, AC to SC-11