Auditor’s Advice Leads to GST Trouble, Madras HC Comes to the Rescue

GST Registration Reinstated by Madras High Court

The Madras High Court has taken a compassionate stance in a case where a mobile phone shop owner, ‘Happy Mobiles,’ had their GST registration canceled due to a misunderstanding regarding the GST threshold limit. The court has ordered the reinstatement of the registration and directed the GST Network to enable the petitioner to file pending returns and clear their dues.

The Case of ‘Happy Mobiles’

The shop owner had relied on advice from their auditor, who had stated that GST was not payable if the annual turnover was below ₹20 lakhs. Acting on this advice, the petitioner did not file GST returns for six months. However, this non-compliance led to the cancellation of their GST registration on September 25, 2018.

The petitioner argued before the court that they had acted in good faith and had no intention to evade tax. They expressed their willingness to file all pending returns and pay the outstanding dues, along with applicable interest and penalties.

Court’s Decision and Conditions

Justice Krishnan Ramasamy, presiding over the case, found the petitioner’s explanation reasonable and sincere, considering their reliance on expert advice. The court canceled the cancellation order and instructed the GST Network to make the necessary portal modifications to allow the petitioner to file returns and pay dues within four weeks.

However, the court also imposed certain conditions. The petitioner must settle their dues without using unverified Input Tax Credit (ITC). Any unused ITC must be examined and sanctioned by the department before future utilization. The court emphasized that failing to comply with these conditions would render the granted relief ineffective.

This case highlights the importance of seeking accurate and up-to-date tax advice and understanding the intricacies of GST regulations.