GST update No 332 on default in compliances due to demise of auditor

It is well known that the departmental officers cancel registration of the taxpayers on frivolous grounds and arbitrary reasons thereby increasing the miseries of taxpayers to manifold. The Courts are flooded with various cases wherein the registration of assessee was restored and liberal approach was adopted by Courts with respect to revocation of cancellation of registration. However, it seems that this practice of cancellation of GST registration which is being adopted by tax authorities ultimately hampers the business of the taxpayers. Recently, one case on similar subject matter was reported before hon’ble Karnataka High Court in the case of M/S SRI. KOLAPUDI ENOCH WASHINGTON V/S ADDITIONAL COMMISSIONER. The decision imparted in this case is subject matter of discussion of our present update.

The petitioner requested to set aside the order and to restore the cancelled registration. It was submitted that due to untimely demise of the auditor of the petitioner, he could not make payments of GST on timely manner and hence, show cause notice was issued dated 24.02.2022. However, he did not receive the show cause notice since the e-mail was automatically routed in “spam folder”. Therefore, no submissions were made by the petitioner and hence, the registration was cancelled subsequently since personal hearing was also not attended by the petitioner. The petitioner therefore filed an appeal and requested for condonation of delay. The respondent dismissed the appeal refusing to condone the delay in preferring the appeal on the ground that he does not have jurisdiction to condone the delay beyond the prescribed period. Therefore, Writ Petition is filed before this Court to condone the delay in exercise of power under Article 226 of the Constitution of India. Reference in this case can be drawn to following: -
•   Practice Strategic Communications V/s. The Commissioner of Service Tax – ILR 2016 KAR 4493
•   Simplex Infrastructure Limited V/s. Joint Commissioner of Central Tax – W.A.No.942/2021 dated 03.12.2021
•   M/s. Himalaya Drug Company V/s. Commissioner of Central Tax – W.P.No.10142/2021 dated 08.09.2022

The Counsel of respondent submitted that there is no merit in the present case and the same is liable to be dismissed.

The Court stated that the submission of petitioner is correct as regards to the fact that the appellate authority does not have any power to condone the delay in preferring an appeal under Section 107 of CGST Act, 2017 beyond the stipulated period. However, it is open for Court to condone the same under Article 226 of the Constitution of India. In the present case, due to untimely demise of auditor and on account of unavoidable and bona fide reasons, it was not possible to file returns and make payment within the stipulated time. Therefore, the explanations offered by the petitioner are accepted and by adopting a justice-oriented approach, the impugned order deserves to be set aside.

The above decision once again demonstrates the fact that revenue authorities should follow a liberal approach as regards to cancellation of registration failing which it will be a loss-loss situation for taxpayers and tax authorities as well. It is high time that Judicial Rulings like these should be followed to avoid any further litigations on the subject matter.

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GST update No 332 on default in compliances due to demise of auditor

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