In a recent ruling, the Patna High Court upheld the cancellation of the Goods and Service Tax ( GST ) registration due to the non-filing of the Goods and Service Tax ( GST ) return for 6 consecutive months and no reasonable cause for delay in filing the appeal.
In early 2021, two companies, Vaibhav Gopal Construction, and M/S Lal Bahadur Yadav (Petitioners) had their GST registrations canceled for failing to file tax returns for six consecutive months, leading to automatic cancellation under GST laws.
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The pandemic severely impacted the operational director of Vaibhav Gopal Construction, who experienced multiple family losses during the lockdown. She stepped away from the business, entrusting tax compliance to a consultant, only to find that returns were not filed later.
The petitioners filed appeals to restore their GST registrations, but the filing was long past the statutory deadline. The petitioner’s counsel claimed that canceling their GST registration violated their fundamental right to conduct business, as protected by Article 19(1)(g) of the Indian Constitution. They also argued that the inability to operate due to registration cancellation restricted their livelihood and business rights under Article 21.
The petitioner’s counsel challenged the constitutional validity of Section 29(2) of the GST Act, asserting that the power to cancel registration for non-compliance was overly restrictive, infringing on their ability to operate freely and potentially extinguishing their business. They relied on the Supreme Court’s extension of the appeal limitation period during the pandemic, arguing that this should have covered their delay in filing appeals.
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The bench, comprising Chief Justice Krishnan Vinod Chandran and Justice Partha Sarathy, observed that GST registration is conditional on adherence to compliance obligations, including timely filing of returns. Registration provides benefits, but the law permits cancellation for non-compliance, as clearly stipulated in Section 29(2) of the GST Act.
The court emphasized that Article 19(1)(g) right is subject to reasonable restrictions and ruled that the provision for cancellation due to non-compliance is a reasonable restriction intended to secure tax revenue for public welfare and ensure regulatory accountability.
The court found the petitioners’ appeals to be filed well beyond the extended limitation period provided during the pandemic noting that even a grace period granted by the Supreme Court had expired. The court highlighted that the petitioners had additional opportunities to restore their registrations, specifically referencing the 2023 amnesty scheme allowing businesses to reclaim canceled registrations upon clearing dues.
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The court found no reason to exercise discretionary power to interfere with the cancellation orders, finding them consistent with statutory boundaries and public policy. Thus, the petition was dismissed upholding the cancellation of the GST registration.
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