2026-VIL-1230-DEL
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SGST High Court Cases

GST - Power to conduct audit under Section 65 of the CGST Act, 2017 for a period after the date from which registration was subsequently cancelled with retrospective effect - Petitioner was registered in 2017 and applied for cancellation of registration on closure of business with effect from 31.12.2019, but the application remained pending. While it was pending, the Respondent issued notice in Form GST ADT-01 under Section 65 proposing audit for the period from 01.07.2017 to 31.03.2021 - The registration was later cancelled with effect from 31.12.2019 - Whether the subsequent retrospective cancellation of registration prevents the Respondent from proceeding with the audit notice, either altogether or for the period after the effective date of cancellation - HELD - An application for cancellation does not bring the registration to an end, as under Rule 21A the registration is deemed to be suspended pending completion of the proceedings, and the person continues to be described as a registered person. The expression registered person in Section 65 must be read in the context of Section 2(13), since an audit looks backwards and examines records maintained, returns furnished, credits availed and refunds claimed under a registration. It cannot be confined to a person whose registration continues to be effective when the examination takes place - A period covered by a registration which had been granted and was not cancelled when the audit was proposed is distinct from a period in which no registration existed, and cancellation determines the legal effectiveness of the registration but does not erase the historical fact that it was granted or the acts undertaken under it - Where registration had been granted and not yet cancelled during the period proposed for audit, that factual nexus satisfies Section 65 even if the registration is later cancelled retrospectively - The treatment of the returns as void and non-est does not place the underlying records beyond examination. The audit does not itself determine liability, and nothing permits the Respondent to treat the returns after the effective date of cancellation as valid or to assume that taxable supplies were made - The contention that retrospective cancellation renders the notice without jurisdiction, wholly or for the later portion of the period, is rejected - The Writ Petition is dismissed - Denial of discretionary relief in a writ petition for non-disclosure of a pending audit notice in the earlier writ petition under which cancellation of registration was obtained - The Petitioner had filed an earlier writ petition seeking directions for cancellation of registration with effect from 31.12.2019 without disclosing the audit notice, although it had replied to the notice a day before the order in the earlier petition and was aware of it. The Petitioner then relied on the directions obtained to seek quashing of the very notice. The Respondent contended that the Petitioner did not approach the Court with clean hands - Whether the Petitioner is entitled to discretionary relief - HELD - The Petitioner's general denial did not specifically state that the notice was disclosed, and the reliance on the delay of the Department in processing the application does not answer the allegation of non-disclosure. The pending audit was material to the relief sought in the earlier petition, and the delay of the Department did not absolve the Petitioner of its obligation to disclose the notice. Having failed to do so, the Petitioner cannot rely on the directions obtained in those proceedings to seek quashing of that very notice.
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