The Hon’ble High Court of Madras vide its order dated 11.08.2023 in the matter of TVL. Raja Stores Vs. The Assistant Commissioner (ST) in W.P.(MD). No. 15291 of 2023 And W.M.P.(MD). No.  12890 of 2023, held that when the Section specifically states ‘any registered person’ then it ought to be construed as existence concern and the unregistered person is exempted from the purview of the said section 65.  On perusal of Section 65, it was found that the audit can be conducted to the said registered persons “for such period”, “for such frequency” and “in such manner”. When a Section provides for periodical audit, the respondent having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit.

The Petitioner filed the writ petition before the Hon’ble High Court seeking to quash the order dated 19.05.2023.

Facts of the Case: –

• The petitioner is a partnership firm doing business in the name and style of Raja Stores, which is the registered Tax payer under the Goods and Services Tax Act, 2017, and was filling monthly returns without fail.
• The petitioner intended to close his business and submitted a petition before the authorities. The authorities after considering the same, allowed the petitioner to close his business with effect from 31.03.2023.  However, the petitioner failed to pay the collected tax.
• Subsequently, the respondent has issued impugned show cause notice dated 19.05.2023 for conducting audit. After receiving the notice, the petitioner sought adjournment but subsequently filed the Writ Petition by challenging the show cause notice, before this Court.

It was contended on the behalf of the petitioner that under Section 65, the respondents are empowered to conduct audit if the concern is registered unit. As on the date, the petitioner's registration is cancelled, he is an unregistered concern. Therefore, the respondent is not having any jurisdiction to conduct an audit.

On the behalf of the respondents, it was submitted that the petitioner had challenged the show cause notice, to which it is bound to submit a reply before the Authorities.  The Writ Petition cannot be maintained against the show cause notice stage itself.  Further, the grounds raised in the Writ Petition cannot be accepted, since it is a recently closed unit and the respondent is having every right to conduct audit. Therefore, the respondents prayed to dismiss this Writ Petition.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and on perusal of Section 65, found that the said Section states that the Commissioner or any other officer authorized through a general or specific order to conduct audit for any registered person. And, when the section specifically states ‘any registered person', then it ought to be construed as existence concern and the unregistered person is exempted from the purview of the said section 65.  However, it is the claim of the respondents that for a period from 2017-2018, 2021-2022, the petitioner was a registered firm and for the said period, the respondent is empowered to conduct audit.
• It was found by the Hon’ble Court on perusal of Section 65 that it is stated that the audit can be conducted to the said registered persons “for such period”, “for such frequency” and “in such manner”. When a Section provides for periodical audit, the respondent having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit.
• However, the Hon’ble Court found that this will not preclude the respondent from initiating assessment proceedings for the said concern under Sections 73 and 74. Therefore, the said impugned order is liable to be quashed. Hence, the impugned order is quashed with liberty to the respondent to initiate assessment proceedings under Sections 73 and 74 of the Act.

The Hon’ble Court with the above findings and observations, allowed the writ petition.