30.11.2022: Assessee Cannot Be Deprived Of Accumulated Credit Due To Cancellation Of Registration On Closure Of Business – Bombay High Court

The Hon’ble High Court of Bombay vide its order dated 17.11.2022 in the matter of Euro Partik Sales Corporation Vs. Union Of India and Ors. in Writ Petition No. 3380 of 2022, held that the Assessee cannot be permitted to forgo the accumulated credit which it is entitled to as deemed excise credit, on cancellation of registration due to closure of business, particularly when under sub-section 3 of Section 29 its liability will continue even after cancellation of registration.

The Petitioner filed the writ petition before the Hon’ble High Court praying for directions to the respondents to re-open the GST Portal to enable the petitioner to file revised TRAN – 1 online or accept the manual copy of the revised Form GST TRAN – 1 as the declaration under Section 140(3) of the CGST Act read with Rule 117 of the CGST Rules.  Further directions were sought to the respondents to allow the petitioner to file Form TRAN – 2 in order to enable the petitioner to avail/claim the credit of Rs. 39,13,025/-.

Facts of the Case: –

  • That the petitioner was registered under the GST Act with the registration number was 27AQNPS5698H1ZV. The Petitioner closed his business and applied for cancellation of registration which was granted by an order dated 18th July 2019.
  • That the petitioner at the time of cancellation had to his deemed excise credit a sum of Rs. 39,13,025/-, which the petitioner was entitled claim transition credit in Form GST TRAN – 1 under Section 140(3) of the CGST Act, 2017. The petitioner applied for transition; however, the transition could not take place due to various reasons.

Held: –

  • The Hon’ble Court after considering the submissions, facts of the case and the documents placed on record, found that it appears that the petitioner was unable to transit the credit because petitioner’s registration had been cancelled.
  • That sub-section (1) of Section 29 provides for an assessee to apply for cancellation on his own motion, sub-section (2) provides for the proper officer to cancel the registration of a person on certain situations mentioned therein. Further sub-section (3) of Section 29 provides that cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.  Therefore, it is crucial for the petitioner to be permitted to transition the credit to new GST regime.
  • That Section 30 provides for revocation of cancellation of registration but only in the case where the registration has been cancelled by the proper officer on his motion. It is not applicable to the situation as in the present case, where the registered person has applied for cancellation.
  • Thereafter, the Hon’ble Court considering the submissions made on the behalf of the petitioner that ‘there is no provision for application for revocation of the cancellation of registration or restoration of the registration in the circumstances similar to the present case’, found that the petitioner cannot be permitted to forgo a sum of Rs. 39,13,025/-, which according to the petitioner is entitled to deemed excise credit, particularly when under sub-section 3 of Section 29 its liability will continue even after cancellation of registration.

The Hon’ble Court with the above findings, held that it would be completely unfair if the petitioner ends up forgoing the deemed excise credit of the substantial amount of Rs. 39,13,025/- and disposed of the writ petition with the following directions: – (a) petitioner shall, by 4.30 p.m. on 18th November 2022, submit the physical application for restoration of the registration; (b) the application, subject to paying all necessary fees and filing requisite documents, shall be considered and registration shall be restored by not later than 22nd November 2022. However, short time was provided since pursuant to the order passed by the Hon’ble Apex Court, the window for TRAN -1 and TRAN-2 migration is open till 30th November 2022; (c) after restoration of registration, the Nodal Officer shall forward the restoration order to GSTN and GSTN shall on receipt of the order ensure that the portal is open in such a way that petitioner will be able to apply for migration under TRAN-1 and TRAN-2 before 30th November 2022; (d) if online restoration is not possible, the order will be passed manually and the Nodal Officer shall forward all those documents to GSTN and GSTN shall consider the said order as if filed online/properly filed and give effect to that in its portal; (e) if it is not resolved by 28th November 2022, petitioner is permitted to file manually for migration of TRAN-1 and TRAN-2 and the Nodal Officer shall consider the same.


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