In W.P.(C) 10363/2022-DEL HC- Order rejecting petitioner’s application for revocation of cancellation of GSTIN is unsustainable as it provides no reason for rejection: Delhi HC
Justices Vibhu Bakhru & Amit Mahajan [24-03-2023]

Read Order: SH. ISHWAR CHAND PROPRIETOR OF M/S BHAGWATI TRADING CO v. UNION OF INDIA & ORS 

LE Correspondent

New Delhi, April 7, 2023: While considering a matter relating to levy of penalty for late filing of the GST returns, for the period the petitioner was disabled from doing so, on account of cancellation of its GSTIN registration, the Delhi High Court has excluded a period of more than one-and-a-half years for the purpose of calculating any penalty.

The petitioner had approached the Division Bench of Justice Vibhu Bakhru and Justice Amit Mahajan for issuance of a Writ directing the respondents to set aside the penalty of Rs 2,32,014 imposed upon the petitioner, Proprietor of M/S Bhagwati Trading Company.

It was the respondents’ case that no demand for penalty had been raised and the amount of Rs 2,32,014 had been computed by the petitioner on its own.

The petitioner had not filed its GST returns for a period of more than six months, resulting in the respondents issuing a Show Cause Notice which was not on record. It was the petitioner’s case that on receipt of the Show Cause Notice, it had filed its GST returns and cured the reason for which the cancellation of its GSTIN registration was proposed.

Notwithstanding the same, the respondent passed an order cancelling the petitioner’s registration. Thereafter, the petitioner’s application for revocation of the cancellation of the GSTIN registration was rejected for the sole reason that the petitioner had not responded to the Show Cause Notice. The petitioner appealed against the said order before the appellate authority and succeeded.

Despite the fact that the appellate authority had directed that the petitioner’s GSTIN registration be restored and had further granted the petitioner, 30 days’ time to file the pending returns, the petitioner’s registration was not restored immediately and was restored later on April 22, 2022. The petitioner submitted that it could not file its returns prior to that date.

The controversy in the present petition related to the levy of penalty for the late filing of the returns.

The Bench was of the opinion that the Order rejecting the petitioner’s application for revocation of cancellation of GSTIN registration was unsustainable as it provided no reason as to why the petitioner’s application was rejected.

The only reason was that the petitioner had not responded to the Show Cause Notice. 

“It is hard to accept that there could be any meaningful response to the said Show Cause Notice. It sets out no reason at all for proposing to reject the petitioner’s application for revocation of cancellation”, the Bench said.

The High Court also took note of the fact that the petitioner’s principal contention was that it had already complied with the requirement of filing the returns on the date when the order cancelling its registration was passed and, therefore, the said order was unsustainable.

“We are, prima facie, of the view that from the date of the petitioner filing an application for revocation of its cancellation, that is, 16.10.2020, the petitioner cannot be held responsible for not filing its returns during the period when the registration stood cancelled”, the Bench held while clarifying that for the purpose of calculating any penalty for the late filing of the returns, the period of October 16, 2020 to April 22, 2022, was liable to be excluded.