Important decision by Madras High Court directing GST Department to act rationally

In the case of?Professional Car Decors v. Superintendent of CGST & C.Ex., the Madras High Court addressed the procedural fairness required in canceling a GST registration due to address discrepancies. Here, the petitioner,?Professional Car Decors, faced GST registration cancellation by the revenue authorities due to a mismatch between the address listed on the GST portal and the property tax documents. Specifically, the property’s door number was listed as “67” in tax documents, but on the GST portal, it was “67B.” This discrepancy arose because the property was internally divided, with “67A” allocated to the petitioner’s sister and “67B” to the petitioner’s own business on a different floor.

Despite the petitioner’s detailed explanation and submission of a response to a show-cause notice, the revenue authorities proceeded to cancel the registration, viewing the discrepancy as a basis for cancellation without further inquiry. When the petitioner applied for revocation, the revenue authorities again dismissed the application without considering the petitioner’s explanation.

The Court emphasized that GST registration cancellation should not be conducted mechanically, especially when a plausible explanation is provided. It held that the revenue authorities should have reasonably verified the petitioner’s claims through an affidavit or further inquiries, rather than canceling the registration outright. The Court noted that such rigid actions could disrupt business operations and, by extension, affect the revenue collection itself.

In its judgment, the Court set aside the cancellation order and directed the revenue authorities to restore the GST registration, subject to certain compliance conditions. These conditions included the petitioner filing pending GST returns, paying any outstanding dues, and a restriction on the immediate use of Input Tax Credit (ITC) until it had been reviewed and approved by the authorities. This approach highlighted the Court’s stance that administrative actions impacting GST compliance must balance procedural fairness with the objective of revenue protection.

Conclusion : The ruling underscored the need for the authorities to adopt a more diligent, inquiry-based approach in cases of minor discrepancies rather than defaulting to stringent penalties like registration cancellations.

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