In a significant judgment benefiting small business owners, the Madras High Court has directed the GST department to reopen the GST portal to allow the filing of pending returns. The relief was granted after a petitioner’s GST registration was cancelled due to non-filing of returns based on the advice of an auditor regarding the ₹20 lakh turnover threshold.
Background of the Case
The petitioner, a sole proprietor operating a mobile phone retail business under the name “Happy Mobiles,” faced cancellation of his GST registration on 25.09.2018. This cancellation was triggered by his failure to file GST returns over a six-month period. The petitioner attributed this non-compliance to reliance on his auditor’s advice, who stated that GST was not applicable if the aggregate turnover remained below ₹20 lakhs in a financial year.
Petitioner’s Plea and Good Faith
The petitioner approached the Madras High Court, asserting that the advice was taken in good faith, with no intention of evading tax. He also expressed his readiness to:
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File all pending GST returns,
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Pay tax dues along with applicable interest and penalties, and
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Comply with all statutory obligations.
This earnest intention to regularize the registration prompted the Court to consider the plea sympathetically.
Court’s Observations and Verdict
The case was heard by Justice Krishnan Ramasamy, who noted that the petitioner’s explanation was reasonable and sincere, especially given the auditor’s professional advice. Taking a balanced view, the Court ruled in favor of the petitioner, stating:
“The explanation provided by the petitioner, coupled with the willingness to comply with statutory dues, shows no mala fide intent. It is a fit case to allow restoration and enable return filing.”
Court’s Directives to the GST Department
The Madras High Court issued the following directives:
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Reopen the GST portal and make necessary technical changes to allow the petitioner to file the pending returns.
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The petitioner must complete the filing of returns and payment of tax dues within four weeks from the date of restoration.
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Unutilized Input Tax Credit (ITC) must be verified by the department before allowing its usage.
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No relief will be granted if the petitioner fails to comply with the Court’s conditions in the stipulated time.
Significance of the Judgment
This judgment reflects a pro-taxpayer approach by the judiciary, especially in cases where non-compliance arises from professional advice rather than fraudulent intent. The Court recognized the practical difficulties faced by small businesses in understanding complex GST regulations and emphasized the need for the system to accommodate genuine errors.
Key Takeaways
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Reliance on professional advice, if bona fide, may be considered a valid ground for relief in GST disputes.
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The GST portal architecture must be flexible enough to accommodate judicial orders and permit rectification of compliance defaults.
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The decision sets a precedent that sincere taxpayers willing to regularize their status should be given an opportunity rather than penalized harshly.
This ruling underscores the importance of legal awareness and cautious reliance on professional advice in GST matters. Businesses are encouraged to seek clarified rulings or second opinions when in doubt about tax thresholds and filing requirements.
Relief: Restoration of cancelled GST registration; reopening of GST portal for compliance