Kerala HC dismisses Writ Petition filed against best judgement order passed under section 62 of CGST Act, 2017 for non- filing returns

Introduction

The Kerala High Court in a significant judgement in the case of Thadukkassery Service Co. Operative Bank Ltd. v. State Tax Officer [2020] (Kerala HC) has emphasized the fact that taxpayers now need to be very careful about compliances and slowly courts would be less inclined to accept the contentions of GST being a new law for non-compliances under the GST Regime.

Facts of the Case:-

1. Petitioner society is an assessee under the Income Tax Act 1961.
2. Inadvertently, the petitioner was granted two permanent account Nos. (PAN) as 1 and 2.
3. On realizing the mistake, the Income Tax Department informed the petitioner that only PAN No.1 will be active and the other PAN No. 2 would not be operational and accordingly the PAN Number 2 was deactivated.
4. Petitioner was also holding registration for carrying on the business of a dealer under the Kerala Value Added Act from the office of the first respondent and was being filed under the said statute. However upon roll out of GST, the petitioner migrated to the new system.
5. But the migration was carried out by giving the deactivated PAN No. 2.
6. On the basis of the aforementioned particulars petitioner was granted registration under the GST Act bearing  the GST No1.
7. Realizing the mistake with regard to the registration with deactivated PAN number, the petitioner applied for a fresh registration and was granted registration with effect from 16^th February 2018 – GST No 2
8. After having obtained the fresh registration number, petitioner submitted an application dated 29.9.2018 before the first respondent for cancellation of previous registration No. GST No 1.

Submission by Petitioner

1. From the March of 2018 onwards the petitioner had been filing proper returns under the GST Act in pursuance of the new certificate which was not disputed by the authority.
2. However the respondent passed separate orders dated 30.09.2019 for the period from July 2017 to October 2019 under Section 62 of the CGST Act demanding Rs.9,99,174 towards tax and Rs.2,87,728 towards interest.
3. He submits that the aforementioned orders have been issued only on account of the fact that no returns were filed by the petitioner under the Act with reference to registration No. GST No.  1 on the basis of the invalidated PAN Number.
4. The error was neither intentional nor willful.
5. In fact, with effect from March 2018, the petitioner has been filing returns under the new registration so obtained.
6. It is submitted that human is bound to err. As such, it is obligatory for the respondents concerned to make appropriate provisions to tackle the issues of such nature instead of imposing penalty.
7. It was a case where the petitioner was not able to comply with the statutory requirements in respect of the business for the period from 1.7.2017 to 12.08.2017 owing to the applicability of the new GST regime.
8. In the other matter, it was also similar kind of difficulties faced by the assessee.
9. Instead of availing the remedy of appeal, the authorities ought to have given an opportunity of hearing to the petitioner to rule out the element of mens rea.

Submissions by Department

1. The Government Pleader relied upon the objections taken in the counter by alleging that once the Income Tax Authority had informed the petitioner with regard to use only the PAN No. 1 with a further warning to desist from using other PAN.
2. Despite that, the assessee migrated to the GST regime had been using PAN No. 2 even in 2017.
3. The scheme of migration from the erstwhile taxation laws to the GST regime was such that every person who had been granted provisional registration should submit an application electronically in Form GST REG-26, duly verified along with the necessary information and documents to obtain the Permanent Registration Number.
4. The assessee obtained GST registration using the active PAN No. 1 only on 16.2.2018.
5. The contention of the petitioner that he had applied for fresh registration on realizing the mistake immediately is not acceptable since on verification of the GSTR 2A details auto generated against the GSTIN GST No 1, it is evident that the GSTIN was used to effect inward supplies during the period.
6. On verification of some of the sample physical invoice copies in respect of the inward supplied effected by the assessee it was ascertained that the GSTIN quoted therein was also GSTIN GST No 1.
7. As per the provisions of Section 29(2)(c) of the GST Act 2017, the assessee was served GST REG-17 (Show Cause Notice for Cancellation of Registration) for failure to file returns for a continuous period of 6 months and an opportunity of being heard was given.
8. But no valid explanations or supporting documents were provided by the assessee.
9. The cancellation of registration of the assessee was with effect from 30.11.2019 and not from 29.9.2018.
10. Assessee had an option to file a valid return within 30 days on the service of the assessment order.
11. Thus for all intends and purposes the alleged uncertainty expressed in the writ petition cannot be brought within the ambit of bonafide mistake
12. Respondent thus urged this Court for dismissal of the writ petition.

Observations of the Court

1. High Court observed that there was no force and merit in aforementioned contentions of petitioner.
2. There was clear-cut information from Income-tax Department to use one PAN No. 1.
3. Despite that petitioner had been filing particulars of invalidated PAN Number on the basis of Registration Number obtained.
4. The cancellation was with effect from 30^th November 2019 and not from 29^th September, 2018.
5. For all these periods, there were no returns, which necessitated assessing officer to assume role of best assessment under section 62 of the Act.
6. Instant case is not of nature wherein it pertained to difficulties faced by assesses in filing returns on roll out of new GST Scheme.
7. The petitioner, for sake of repetition, was in 2016 informed with regard to use the PAN No. 1.
8. Thus, for all intends and purposes, there cannot be any bonafide omission or mistake.

Writ petition was found to be devoid of merits by Kerala High Court and accordingly, the writ petition was dismissed.

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