Bombay High Court: Provisions of GST Cannot be Interpreted to Deny Right to Carry Trade and Commerce by Citizens

Bombay High Court: Provisions of GST Cannot be Interpreted to Deny Right to Carry Trade and Commerce by Citizens

The Bombay High Court by its division bench comprising of Justices Mangesh M. Patel and S.G. Chapalgaonkar while adjudicating a writ petition in the matter of Rohit Enterprises vs. The Commissioner State GST Bhavan and others observed that the provisions of GST enactment cannot be interpreted so as to deny right to carry on Trade and Commerce to any citizen and subjects.

The petitioner/assessee is employed in the fabrication industry. It is registered under the Central Goods and Services Tax Act, 2017 as well as the Maharashtra State Goods and Services Tax Act, 2017. The certificate of registration was issued to his firm.

The petitioner pleaded that since he had undergone angioplasty and the firm suffered a financial setback in the pandemic situation, GST returns from August 2021 could not be filed.

The State Tax Officer, Aurangabad, issued a show-cause notice, calling upon the petitioner to furnish his explanation within a period of seven working days. The notice stipulated that the registration of the petitioner stood suspended. Section 29(2) of the GST Act enables proper officers to cancel registration if a registered person or firm fails to furnish three consecutive returns.

The petitioner replied to the show cause notice on 3 March, 2022. Citing the reason for the financial crunch, he requested the revocation of the notice. However, the State Tax Officer canceled the registration with effect from 21 August, 2021. The petitioner requested the revocation of the cancellation of registration.

The State Tax Officer responded by issuing a show cause notice for the rejection of the application. Following which the petitioner was called upon to furnish the reply within 7 days along with supporting documents like bank statements up to the date of the notice, a challan of tax, interest, and a late filing penalty.

The Court was of the opinion that the object of the provisions under the GST Act, it is not in the interest of the government to curtail the rights of entrepreneurs like the petitioner. The petitioner must be allowed to continue business and contribute to the state's revenue.

The Court noted that the petitioner had submitted that he was ready and willing to pay all the dues, along with penalty and interest as applicable.

The Court observed that, "in our view, the provisions of GST enactment cannot be interpreted so as to deny right to carry on Trade and Commerce to any citizen and subjects. The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of shortcomings in the scheme of GST enactment. The right to carry on trade or profession cannot be curtailed contrary to the constitutional guarantee under Art. 19(1)(g) and Article 21 of the Constitution of India. If the person like petitioner is not allowed to revive the registration, the state would suffer loss of revenue and the ultimate goal under GST regime will stand defeated. The petitioner deserves a chance to come back into GST fold and carry on his business in legitimate manner."

The next aspect taken up by the Court was the issue regarding limitation in filing the appeal under Section 107 of MGST. The Court remarked that indeed the Deputy Commissioner of State Tax has no power to condone the delay beyond 30 days. But then one cannot overlook the aspect of provisions stipulating limitations. The objective is to terminate the lis and not to divest a person of the right vested in him by efflux of time.

"The petitioner, who is sufferer of unique circumstances resulting from pandemic and his health barriers, would be put to great hardship for want of GST registration. The petitioner who is small scale entrepreneur cannot carry on production activities in absence of GST registration. Resultantly, his right to livelihood would be affected. Since his statutory appeal suffered dismissal on technical ground, we cannot allow the situation to continue. We find that, in the facts and circumstances of this case it would be appropriate to exercise our jurisdiction under Art. 226 of the Constitution of India," observed the Court.

Accordingly, the Court allowed the writ petition and quashed the order cancelling GST registration of the petitioner passed by the State Tax Officer.