In W.P. No.11833 of 2022-BOM HC- Provisions of GST enactment cannot be interpreted so as to deny right to carry on Trade and Commerce to citizen and subjects: Bombay HC 
Justices S.G. Chapalgaonkar & Mangesh S. Patil [16-02-2023]

Read Order: ROHIT ENTERPRISES VS  THE COMMISSIONER

Mansimran Kaur

Mumbai, February 20, 2023: The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of shortcomings in the scheme of GST enactment, the Bombay High Court has observed while noting that if the 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 Division bench of Justice S.G. Chapalgaonkar and Justice Mangesh S. Patil allowed the present appeal by observing that the petitioner must be allowed to continue business and contribute to the state’s revenue, 

The petitioner approached this Court under Article 226 of the Constitution of India with following prayers: - that the order passed in an Appeal by Dy. Commissioner (Appeal) Aurangabad may kindly be quashed and set aside.

That the order passed by the State Tax Officer dated March 14, 2022  of cancellation of registration may kindly be quashed and set aside;  That, the order dated February 28, 2022 passed by the State Tax Officer suspending the registration w.e.f.  February 28, 2022 may kindly be quashed and set aside; That, the Hon’ble High court may kindly hold that, the petitioner registration was valid from February 28, 2022 onwards. 

Factual background of the case was such that the petitioner was a proprietary firm engaged in the business of fabrication work. It is registered under the Central Goods and Services Tax Act, 2017 (GST Act) as well as Maharashtra State Goods and Services Tax Act, 2017. 

Petitioner contended  that since he had undergone angioplasty, and the firm suffered financial setback in pandemic situation, GST returns from August 2021 could not be filed. Section 29(2) of the GST Act enables proper officers to cancel registration if a registered person / firm fails to furnish three consecutive returns. 

The State Tax Officer, Aurangabad issued a show cause notice calling upon the petitioner to furnish his explanation within a period of 7 working days. The notice stipulated that the registration of the petitioner stood suspended. The petitioner replied to the show cause notice citing the reason of the financial crunch, he requested for revocation of the notice. However, the State Tax Officer cancelled the registration with effect from August 21, 2022. 

The petitioner requested for revocation of the cancellation of registration. In response, the State Tax Officer issued a show cause notice for rejection of the application. 

The petitioner filed an appeal under section 107 of the Maharashtra Goods and Service Tax Act, 2017 challenging cancellation of registration.

After considering the submissions, the Court noted that it appeared that the petitioner was earning his livelihood through his fabrication business and required registration under GST Act to run the business. The entire world suffered during the pandemic.

 The small scale industrialists and service providers like petitioner lost their business for more than two years. The financial losses suffered during this time cannot be ignored particularly when it comes to small scale businesses and service providers.

 The stringent provisions of the GST Act took its own course. The petitioner suffered cancellation of registration. Even he lost his appellate remedy because of a lapse of limitation. The petitioner has been practically left remediless. He seeks to invoke jurisdiction of this Court under Art. 226 of the Constitution of India, the Court further remarked. 

The Court was of the view, “the provisions of GST enactment cannot be interpreted so as to deny the 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 the petitioner is not allowed to revive the registration, the state would suffer loss of revenue and the ultimate goal under the GST regime will stand defeated”, the Bench held. 

On the issue regarding limitation in filing the appeal under Section 107 of MGST Act, the Bench opined 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.

Reference was also placed on the case of Mafatlal Industries Ltd. Vs Union of India. 

In view of the above, the Court opined  that 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 a 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, the Court further stated. 

In such facts and circumstances, the Bench allowed the petition.