Petitioner Can’t Escape Audit Proceedings on the Grounds of Registration Cancellation on Date of Audit | HC

Case Details: LJ-Victoria Properties (P.) Ltd. v. Union of India - [2024] 168 taxmann.com 436 (Bombay)

Judiciary and Counsel Details

• M.S. Sonak & Jitendra Jain, JJ.
• Mahesh Raichandani & Jasmine Dixit, UBR Legal for the Petitioner.
• Himanshu Takke, for the Respondent.

Facts of the Case

After conducting business for three years, the petitioner applied for cancellation of its CGST registration on the ground that they have ceased to be liable to pay tax on account of the closure of business. On 6 November 2023, the GST department issued notice for conducting an audit for the period April 2021 to April 2022, although in reference, it is stated as 2020-21. The petitioner replied that its registration is cancelled, an audit under Section 65 of the Act cannot be conducted but another notice for conducting an audit for the financial year 2020-21 was issued. Aggrieved by the order, the petitioner filed a writ petition.

High Court Held

The Bombay High Court held that the definition of the ‘registered person’ under the CGST Act does not exclude a person whose registration has been cancelled. Therefore, for the purpose of the CGST Act, ‘registered person’ would include a person who at any point was granted registration certificate, even though subsequently registration may have been cancelled. The phrase ‘registered person’ for the purpose of Section 65 and on a holistic reading of all the connected provisions would mean a person who was registered at some point under the CGST Act even though, subsequently, such registration has been cancelled. The petitioner’s contention that a person whose registration has been cancelled is not covered by the provisions of Section 65 is misconceived.

Even if the registration is cancelled, such a person is liable for tax or other dues determined before or after the date of cancellation as per Section 29(3) of the CGST Act. The cancellation of registration does not discharge such person of any obligation under the CGST Act for any period before or after such cancellation. There is an obligation cast on a person in whose case of audit is conducted to comply with the directions of the tax authorities under Section 65(5). These obligations are not affected even if registration is subsequently cancelled. If the contention of the petitioner is accepted, then the phrase ‘registered person’ would become redundant because for the financial year/period for which an audit is authorised, a person registered for that year would have to be treated as an unregistered person. Such a contention cannot be accepted and is misconceived. Therefore, the petition was dismissed.

List of Cases Reviewed

• Ashoka Fabricast (P.) Ltd. v. Union of India [2024] 162 taxmann.com 719 (Rajasthan) (para 27) followed.
• Tvl. Raja Stores v. Asstt. CIT [2023] 153 taxmann.com 657/99 GST 834/77 G.S.T.L. 367 (Mad.) (para 26) distinguished.

List of Cases Referred to

• Tvl. Raja Stores v. Asstt. Commissioner (ST) [2023] 153 taxmann.com 657/99 GST 834/77 GSTL 367 (Madras) (para 5)
• Ashoka Fabricast (P.) Ltd. v. Union of India [2024] 162 taxmann.com 719 (Rajasthan) (para 27).