GST Dept. can’t conduct GST audit after cancellation of GST registration: Madras HC

The petitioner, a partnership firm operating under the name and style of Raja Stores, filed a petition to quash an order dated 19.05.2023.2. The authorities allowed the petitioner to close his business with effect from 31.03.2023, but the petitioner failed to pay the collected tax. As a result, the respondent issued a show cause notice dated 19.05.2023 for conducting an audit. The petitioner challenged the show cause notice, arguing that the respondent was not entitled to conduct an audit under Section 65 of the Central Goods and Services Tax Act, 2017/Tamil Nadu Goods and Services Tax Act, 2017. The respondents countered, stating that the petitioner had challenged the show cause notice and was bound to submit a reply before the authorities. They also argued that the grounds raised in the Writ Petition cannot be accepted since it is a recently closed unit and the respondent has every right to conduct an audit. Therefore, the respondents prayed to dismiss this Writ Petition. The petitioner argued that under Section 65, the respondents are empowered to conduct audit if the concern is a registered unit. However, as the petitioner's registration was cancelled, they are an unregistered concern, and therefore, the respondent is not having any jurisdiction to conduct an audit. The respondent argued that the audit was being conducted for a period from 2017-2018, 2021-2022, and the respondent claimed that for the said period, the petitioner was a registered firm and the respondent was empowered to conduct an audit. Upon reviewing Section 65, it was stated that the audit could be conducted to the registered persons "for such period", "for such frequency" and "in such manner". However, the respondent's failure to conduct an audit for all these years does not preclude the respondent from initiating assessment proceedings for the petitioner concern under Sections 73 and 74 of the Act. Therefore, the impugned order is liable to be quashed, and the respondent can initiate assessment proceedings under Sections 73 and 74 of the Act. In conclusion, the petitioner's counsel, M.V. Mani Babu, and A.K. Manikkam, argued that the respondent could initiate assessment proceedings for the petitioner concern under Sections 73 and 74 of the Act. The court held that the petition was allowed, and no order was issued, resulting in the closure of the connected miscellaneous petition.