Cancellation of GST Registration on hyper technical ground only reduces employment, revenue: Calcutta High Court

The Calcutta High Court recently observed that instead of cancelling GST registration of businesses on hyper technical grounds, the authorities must take a reasoned view especially when such businesses provide employment for many [M/s. CIGFIL Retail Pvt. Ltd. v Union of India & Ors.].Justice MD Nizamuddin, while ordering a reconsideration of the cancellation of the petitioner's registration under the State Goods and Services Tax Act, opined that in the instant case, the authorities should have taken a more lenient stance as the petitioner's business provides employment and adds to the State's coffers.."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 held..The order was passed on a petition filed 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.Its GST registration was cancelled in February 2021 on the ground that registration in question was obtained by documents void ab initio and that there was no existence of business at the declared place.The petitioner's application for revocation of cancellation was rejected by the authorities as was the appeal against the same..It was argued that the petitioners registration was cancelled on a purely technical ground of minor defect in the sub-let agreement, which was entered into between the petitioner and the lessor, where the lessor has made some incorrect description about its status.Even this defect was rectified by a supplementary agreement which was produced before the authorities, the petitioner claimed.So far as allegation of non-existence of the petitioner at the registered place was concerned, it was the case of the petitioner that recently, in order to avoid the violation of Covid-19 protocol, it was carrying on business from elsewhere.However, even during this period, the petitioner submitted that it had paid tax to the State and GST Authority concerned, which were all part of the record..The Court opined that if the authorities were to cancel registrations of businesses on such technical grounds, it would only do itself more harm than good as these businesses are not engaged in anything illegal and in fact, provide employment to many and add to the State's revenue.In this regard, the Court referred to its previous decision in International Value Retail Private Limited Vs. Union of India & Ors.Considering the facts and circumstances of the case and records available and submission of the parties, the Court set aside the orders cancelling the registration and the order of the Appellate Authority dated confirming the cancellationIt, therefore, directed the State respondent concerned 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 ordered.[Read Order]