The Madurai Bench Of Madras High Court in case of M/s Tvl.Raja Stores (in W.P.(MD).No.15291 of 2023) has held that GST Audit under Section 65 can not be carried out by the Department after cancellation of Registration by the Department. However, it has been held that the Department can carry out assessment and raise demand under Section 73/74. (Copy of Order is also attached in the last for reference please)
Basis of Decision (Based on our interpretation)
(1) The Commissioner or any officer authorized by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed.
(2) The officers referred to in sub-section (1) may conduct audit at the place of business of the registered person or in their office.
(3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed.......
Petitioner (Assessee) has pleaded that Section 65 of CGST Act, 2017 allowed the Department to carry out the audit of only Registered Person. Since, on the date of audit, His Registration is cancelled, he is not a registered person as on date of Audit. 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, Department pleaded that the audit is being conducted for a period from 2017-2018, 2021-2022 (date of cancellation is 31.03.2023). Therefore, the Department claims that for the said period, the petitioner was a registered firm and for the said period, the Department is empowered to conduct audit.
Decision of High Court
On perusing Section 65, 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 Department having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit. However, this will not preclude the Department 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 Department to initiate assessment proceedings under Sections 73 and 74 of the Act.
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Disclaimer: We did interpretation of Hon’ble High Court Decision for purely academic purpose. In case, there is any mistake in understanding of the order, we are apologised to the High Court.
Copy of Order