Dept’s. Failure To Conduct Audit Of ‘Registered Person’ Within Boundaries Of Sec 65 Of Cgst Act, Renders Them Ineligible To Do So Belatedly

Commenting on the validity of Audit proceedings proposed to be conducted by the GST Department in respect of the Petitioner, the Madurai Bench of the High Court of Madras drew attention to Section 65 of the CGST Act 2017 and held that where the Act provided for periodical audit, the Revenue could not abruptly commence audit proceedings, more so where the Department did not conduct audit for a length of time.

Thus, the High Court held that the Department cannot conduct GST audit after approving cancellation of GST registration.

A Single Judge bench of Justice S Srimathy drew attention to the phrases “for such period”, “for such frequency” and “in such manner” and concluded that the Section 65 of the CGST Act envisages a periodical audit, and hence an order proposing Audit warranted being quashed where it was passed suddenly after a long gap of time.

The Petitioner-Assessee was represented by Mr. M.V. Mani Babu whereas the Respondent-Revenue was presented by Mr. A.K.Manikkam, Special Government Pleader.

The Petitioner, a partnership firm and holding registration under the Tamil Nadu Goods and Services Tax Act 2017 and also having a record of filing monthly records without fail, intended to close the business, and submitted a petition to such effect before the Department.

The Department passed an order dated 03.03.2023 allowing the Petitioner to close the business with effect from 31.03.2023.

Alleging that the Petitioner had failed to deposit the tax that it had been collecting from its customers, the Department issued a Show Cause Notice proposing to conduct audit. The Petitioner filed the present petition to contest the audit proposed to be conducted.

On hearing the contentions of both parties, the Bench observed that while the Department was precluded in this case from conducting a sudden audit, after not having conducted one in a long time, the Bench also observed that the Department was not precluded from conducting assessment proceedings under Section 73 and 74 of the CGST Act. 

With such observations, the Bench proceeded to dispose of the writ petition.

Cause Title: Tvl.Raja Stores Vs The Assistant Commissioner (ST) [W.P.(MD) No.15291 of 2023 / 2023-Enterslice-1-HC-Bom-GST]

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TVL.-Raja