PROVISIONS
GST registration may be suspended by the proper officer, if he has reasons to believe that the registration is liable to be cancelled under certain situations as prescribed by law. Such suspension comes into effect from a date determined by the proper officer. Further, the suspension would be in force until the completion of proceedings for cancellation.
If a registration is liable to be cancelled:
- the proper officer shall issue a show cause notice, wherein the registered person is required to reply within the prescribed time limit; and
- the proper officer shall issue an order (in Form GST REG-19) within 30 days from the date of reply to the show-cause notice. Hence, the cancellation proceedings shall be concluded within 30 days from the date of reply to the show-cause notice.
ISSUES
The following issues emanate therefrom:
- How can the cancellation proceedings be concluded if the registered person belatedly replies to the show-cause notice?
- What if the assessee altogether fails to reply to the show-cause notice?
ORDER OF THE HIGH COURT OF RAJASTHAN
In the instant case[1], the proper officer suspended the registration. The registered person belatedly filed the reply to show-cause notice. The proper office too did not issue the order concluding the cancellation proceedings within the prescribed time-limit.
The Hon’ble High Court of Rajasthan, vide its order dated July 05, 2021, observed that suspension of registration brings the entire business to a standstill. Suspension of registration is worse than cancellation. At least, against cancellation of registration, the assessee can resort to legal remedies. On the other hand, against suspension pending an enquiry, the tax authorities or the Court(s) would usually exhibit reluctance even if the assessee chooses to approach them.
Importantly, the Hon’ble Court observed that cancellation proceedings cannot be pending even if the assessee failed to file reply to the show-cause notice within the prescribed period.
[1] S.B. Civil Writ Petition No.7463 of 2021
COMMENTS
Suspension / registration of cancellation significantly impacts the business. At the same time, such provisions are enshrined in the Act to prevent mischief / loss of revenue. Thus, on purposive construction and in light of the aforesaid order of the Hon’ble High Court, it appears that if the registered person fails to reply within the stipulated time limit, the proper officer should conclude the cancellation proceedings within 30 days thereof (especially in situations where the registration is suspended).
Consequently, if the registration is suspended, cancellation proceedings are pending before the proper officer beyond the time-limit prescribed under law and where the assessee has also filed reply to the show-cause notice, assessee should approach the higher authorities (or approach the Writ Court thereafter).
