Cancellation of GST Registration Can Solely Occur U/S. 29 r.w Rule 21
In a recent ruling, the Allahabad High Court reaffirmed the legal framework for cancellation of GST registration. The court emphasized that the cancellation of GST registration should be solely based on the provisions of Section 29 of the Goods and Services Tax Act, 2017, in conjunction with Rule 21 of the GST Rules, 2017. No reference or assistance from any other legal statute should be sought in the process.
Court’s Observations
The court referred to a prior Supreme Court ruling in the case of Union of India and others Vs. Ind-swift Laboratories Limited. The Supreme Court had emphasized that a taxing statute should be interpreted strictly according to its clear provisions. In this context, the Allahabad High Court ruled that Section 29 of the GST Act, combined with Rule 21, provides a comprehensive mechanism for cancelling GST registration, and no other statute should be considered for guidance.
The court further clarified that any cancellation of GST registration directed through the Taj Trapezium Zone Pollution (Prevention and Control) Authority (TTZ Authority) under the Environment (Protection) Act, 1986, would still be subject to Section 29 of the GST Act and Rule 21 of the GST Rules, 2017.
Background of the Case
The case involved a petitioner’s firm engaged in the retail business of coal. The petitioner had opted for the compounding scheme under Section 9(1) of the UPGST Act. A show cause notice (SCN) was issued proposing the GST registration cancellation, leading to the cancellation of registration despite the petitioner’s response. The petitioner’s appeal against the cancellation was also dismissed.
The petitioner’s counsel argued that the cancellation was legally flawed because the GST Act is a self-contained legal framework. To cancel registration, the requirements under Section 29 of the UPGST Act and Rule 21 must be followed. The petitioner contended that they had not violated any GST Act provisions.
Additionally, the petitioner claimed that the directives for cancellation were never served, the cancellation order lacked reasoning, and the jurisdiction of the TTZ Authority had expired.
Court’s Decision
The court noted that the directives issued by the TTZ Authority were applicable only to the industrial sector as per Section 5 of the Environment (Protection) Act, 1986. Furthermore, the court emphasized that if an offense is punishable under both the 1986 Act and another law, prosecution should occur under the other statute.
The court strongly reiterated that, for cancelling GST registration, reliance should only be placed on Section 29 of the GST Act and Rule 21 of the GST Rules. No other statute should be referred to for guidance.
The court referred to the precedent set by the Supreme Court and the Allahabad High Court in similar cases to support its interpretation of the law.
In conclusion, the court invalidated the order cancelling the petitioner’s GST registration due to the absence of findings regarding the petitioner’s failure to maintain proper books of Account. The authorities were instructed to reinstate the petitioner’s registration certificate retroactively, along with associated benefits.
Conclusion
The recent ruling by the Allahabad High Court reinforces the strict interpretation of the GST Act in matters of registration cancellation. Section 29 and Rule 21 are the primary legal provisions to be followed, and no reference to other statutes should be sought in this context. This judgment provides clarity and guidance for future cases involving the cancellation of GST registration.
Case Title: Vidya Coal Depot Vs Additional Commissioner (Appeal) Brage II; Citation: Writ Tax No.394/2023; Date of Order; 14.09.23
Note on Section 29 and Rule 21
Section 29: Cancellation or Suspension of Registration
(1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where:
(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25.
[Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.]
(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where:
(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or
(b) a person paying tax under section 10 has not furnished 3[the return for a financial year beyond three months from the due date of furnishing the said return]; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for a 4[such continuous tax period as may be prescribed]; or
(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
(e) registration has been obtained by means of fraud, willful misstatement or suppression of facts:
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.]
(3) the cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.
(4) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.
(5) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed:
Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed.
Rule 21: Registration to be cancelled in certain cases
The registration granted to a person is liable to be cancelled, if the said person,
(a) does not conduct any business from the declared place of business; or
(b) issues invoice or bill without supply of goods or services 2[or both] in violation of the provisions of this Act, or the rules made thereunder; or
(c) violates the provisions of section 171 of the Act or the rules made thereunder; or
(d) violates the provision of rule 10A; or
(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or
(g) violates the provision of rule 86B; or
(h) being a registered person required to file return under subsection (1) of section 39 for each month or part thereof, has not furnished returns for a continuous period of six months; or
(i) being a registered person required to file return under proviso to subsection (1) of section 39 for each quarter or part thereof, has not furnished returns for a continuous period of two tax periods.
To Access the Process of filing for cancellation of GST Registration CLICK HERE
To Access the CBDT Notification No. 91/2023 CLICK HERE