The Calcutta High Court recently passed a judgment in M/s. Modicum Enterprise (OPC) Private Limited v. Deputy Commissioner of State Tax/Assistant Commissioner of State Tax [M.A.T No. 1828 of 2022 with I.A. No. CAN 1 of 2022 dated December 22, 2022] regarding the applicability of late fee under Section 47 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) on an assessee whose GST registration was cancelled on factually incorrect grounds.
The appellant, M/s. Modicum Enterprise (OPC) Private Limited, was a registered dealer under the CGST Act whose GST registration was cancelled by the revenue department on the ground that it was a non-existing dealer. The appellant appealed this cancellation before the appellate authority, and the cancellation was subsequently revoked and restored. However, when the appellant attempted to file returns, there was a demand of INR 5,000/- per return as late fee payable under Section 47 of the CGST Act. The appellant filed a petition against this demand, which was declined by the learned Single Judge in an order dated September 28, 2022. The appellant filed an intra-court appeal against this decision.
The issue before the court was whether late fee could be demanded from the appellant under Section 47 of the CGST Act. The court analyzed Section 47 of the CGST Act and noted that the provision deals with a person who fails to furnish GST returns under Section 39, Section 45, or Section 44. The court observed that the respondent did not state that the appellant had failed to furnish its return within the due date. Instead, the reason for non-furnishing of returns was the cancellation of GST registration on the ground that the appellant was a non-existing dealer. The court noted that the cancellation of appellant’s GST registration was restored by the appellate authority on the grounds that the order was passed on a factually incorrect premise. Hence, the appellant could not be penalized by demanding late fee, and Section 47 of the CGST Act could not be attracted.
The court held that the demand of late fee of INR 5,000/- per return from the appellant was without jurisdiction and not tenable in the eye of law. The court restrained the respondent from demanding any late fee from the appellant in respect of the returns which the appellant intended to file. The court directed the respondent to render necessary assistance to the appellant to facilitate the process of filing of return so that the appellant would be able to file the return without the payment of late fee within a period of three weeks. The court also directed the respondent not to initiate any fresh proceeding for cancellation of the GST registration on the ground of non-filing of the return.
In conclusion, the Hon’ble Calcutta High Court held that an assessee cannot be penalized by demanding late fee under Section 47 of the CGST Act where the assessee had not filed returns due to the cancellation of its GST registration on factually incorrect grounds. The court directed the revenue department to facilitate the process of filing of return without the payment of late fee and restrained them from initiating any fresh proceeding for cancellation of GST registration on the ground of non-filing of the return.
