Zero Supply Led Assessee To Believe There Was No Requirement To File GST Returns: Gujarat High Court Quashes Order Cancelling GST Registration

The Gujarat High Court has quashed the order of cancellation of registration and directed the department to restore the registration of the petitioner.

The division bench of Justice Sonia Gokani and Justice Mauna M. Bhatt has observed that the zero supply led the petitioner to believe that he was not required to file the returns. The assessee's consultant had not advised him correctly, which led to the non-filing of the return, which has now been filed.

The petitioner/assessee is a contractor engaged in providing construction services. Since the assessee was out of business, the return after September 2018 could not be filed. The person engaged by the petitioner also was under the impression that since outward supply is zero, there is no need for filing the return.

The petitioner was served with the show cause notice asking the petitioner to show cause as to why the registration was not cancelled as he did not furnish the return for a continuous six-month period. The show cause notice was received on the portal. However, the erstwhile consultant of the petitioner did not inform the petitioner of the same, and he left the assignment around the same time to explore better and other opportunities.

The petitioner's registration number was cancelled on March 18, 2021.

The petitioner contended that after self-assessing, the petitioner has paid the amount of taxes and penalties and has also undertaken that whatever may be assessed by the authority, he shall be ready to also pay the same. Moreover, the consultant had not informed him, and that resulted in his not filing the returns.

The department contended that if the petitioner is keen to continue his business, he ought to have been more vigilant. Not only was no return filed, but he has also not responded to the show cause notice issued nor filed any written submissions to the notice, and both the authorities have concurrently held him in contempt. If the assessee is allowed to be sluggish in filing the return and is also allowed to wake up after a long time, it may be detrimental to the system itself.

The court held that the order for cancellation of registration was quite cryptic. It hardly gives any detail, which is otherwise necessary.

"The petitioner appears to be someone who is keen to continue his business, and the State's obligation is to ensure the implementation of the law but at the same time not to thwart, in any manner, the business prospects of the citizens," the court noted while quashing the cancellation order.

Case Title: Atlafbhai Rajabali Dosani Vs Superintendent

Citation: 2022 LiveLaw (Guj) 412

Date: 30/11/2022

Counsel For Petitioner: Advocate Hiran J. Trivedi

Counsel For Respondent: Advocate Priyank P. Lodha

Click Here To Read Order