Two High Courts have recently held against cancellation of GST registrations of the assessees by the Revenue department in certain specific situations. While Orissa High Court has held that the registration of purchasing dealer cannot be cancelled for a fraud committed by the selling dealer, Patna High Court has held that GST registration cannot be cancelled without considering reasons for delay in filing of the periodic GST returns.
Registration of purchasing dealer cannot be cancelled for fraud committed by seller
The Orissa High Court has upheld the plea that for the fraud committed by the selling dealer, which resulted in cancellation of its registration, there cannot be an automatic cancellation of the registration of the purchasing dealer. Relying on the Gujarat High Court decision in the case of Vimal Yashwantgiri Goswami, the Court observed that in the present case also apart from simply stating that the explanation offered was not ‘satisfactory’, no reasons were given by the department for cancellation of the petitioner’s registration.
The Court in the case Bright Star Plastic Industries v. Additional Commissioner [2021 TIOL 1965 HC ORISSA GST] noted that the appellate order also only proceeded on the basis that this was a preventive measure and failed to discuss the explanation offered by the assessee.
Allowing the petition, the High Court observed that to attribute fraud to the purchasing dealer, the Department needs to satisfy a high threshold of showing that the purchaser indulged in the transactions with the full knowledge that the selling dealer was non-existent.
Registration cannot be cancelled without considering reasons for delay in filing returns
In this case, order for cancellation of registration was issued without referring to the contents of the show cause notice issued and the response thereto. Further, the order was non-speaking and the reason for cancellation of registration was not mentioned. The writ petition was filed for restoration of registration.
The petitioner could not file the returns on time due to the reasons beyond petitioner’s reach. However, the petitioner filed the returns after some delay with late fee for relevant period and also discharged the tax liability.
The Patna High Court in this case Brajesh Enterprises v. State of Bihar [2021 VIL 709 PAT] stated that the competent authority should have condoned the delay considering the facts and circumstances and onset of pandemic. Restoration of the petitioner’s registration was directed.