Cancelling GST Registration On 'Hyper-Technical' Grounds Causes Revenue Loss, Aggravates Unemployment: Calcutta High Court

The Calcutta High Court has recently observed that cancellation of GST registration of businesses on hyper technical grounds causes revenue loss for the State and aggravates unemployment.

Accordingly, the Court directed that a 'reasoned order' must be passed while cancelling GST registration and that opportunity of hearing must be given to the concerned parties. 

Justice MD Nizamuddin observed, 

"In view of the facts and circumstances of the case that it is not a case of tax evasion or causing revenue loss to the Government rather petitioner's activity of carrying on the business which cannot be called illegal is creating revenue for the State as well as in helping the State to solve the problem of unemployment a little bit and such type of drastic action in the facts and circumstances of the case by canceling the registration of the petitioner on such hyper technical ground will not help the State rather it will cause revenue loss to the State as well as aggravate unemployment problem in the State which will be a social problem in the society"

The Court was adjudicating upon a plea moved by M/s. CIGFIL Retail Pvt. Ltd. whose registration under GST had been cancelled by the authorities under the provisions of Section 29(2) of the State GST Act.

The GST registration was cancelled in February 2021 on the ground that the registration had been obtained by documents which were void ab initio and that there was no place of business at the declared place. The petitioner's application for revocation of the cancellation was rejected by the authorities and thereafter the instant appeal had been filed. 

During the proceedings, the petitioner had argued that the registration had been cancelled on a purely technical ground of minor defect in the sub-let agreement, which was entered into between the petitioner and the lessor. The Court was further apprised that this defect had been subsequently rectified by a supplementary agreement which was submitted before the authorities. 

Furthermore, the petitioner contended that in order to avoid the violation of Covid-19 protocol, it was carrying on business from elsewhere and not from the declared premises. However, even during this period, the petitioner submitted that it had paid tax to the State and GST Authority concerned. 

On a perusal of the record, the Court set aside the orders cancelling the registration and the order of the Appellate Authority confirming the cancellation. It further directed the concerned State authority  to consider afresh the case of the petitioner and reiterated that it must not take a hyper technical view and pass a well reasoned order.

"While re-considering the case of the petitioner for revocation of cancellation of its registration, the respondent concerned will make a physical inspection of the premises in question upon notice to the petitioner and give opportunity to the petitioner to place all the documents to satisfy the respondent concerned about the actual physical possession of the petitioner at the premises in question and the respondent concerned may verify the existence of the petitioner at the premises in question as well as carrying on business activity of the petitioner from the premises in question from the local people and take a final decision by not taking a hyper technical view and pass a reasoned and speaking order after giving opportunity of hearing to the petitioner or its authorised representatives," the Court directed. 

Case Title: M/s. CIGFIL Retail Pvt. Ltd. v Union of India & Ors.

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