Decided 1 May 2024. The Rajasthan High Court has held that the department can audit a taxpayer under section 65 of the CGST Act, and assess it, for the years in which it was registered, even though its registration was cancelled before the audit began. Section 29(3) keeps liabilities for the earlier period alive. The writ petition was dismissed with costs of Rs 25,000.
Case at a glance
| Case | M/s Ashoka Fabricast Pvt. Ltd. v. Union of India & Ors. |
| Forum | Rajasthan High Court, Jaipur Bench (Justice Pankaj Bhandari and Justice Shubha Mehta) |
| Case No. | D.B. Civil Writ Petition No. 2859 of 2024 |
| Date of order | 1 May 2024 |
| Key provisions | Sections 29(3), 65(1) and 73 CGST Act |
| Result | Writ dismissed with costs of Rs 25,000; liberty to appeal |
Facts of the case
The petitioner's registration was cancelled on its own application on 16.01.2020. Later an audit notice was issued, followed by a show cause notice under section 73 dated 01.06.2023 and an assessment order dated 30.11.2023 for FY 2017-18 to 2019-20.
The petitioner argued that section 65 allows audit only of a 'registered person', so an audit after cancellation was without jurisdiction. It relied on the Madras High Court's decision in Tvl. Raja Stores.
Issue before the High Court
Can the department audit and assess a person whose GST registration has been cancelled, for the periods when it was registered?
What the High Court held
- Section 29(3) states that cancellation does not affect the liability to pay tax and other dues for any period before cancellation, whether determined before or after cancellation.
- Read harmoniously with section 29(3), a 'registered person' under section 65 includes a person who was registered for the period being audited.
- The petitioner was registered for the years assessed. After the audit, a section 73 notice was issued, a detailed reply was filed and only then was the order passed.
- The department alleged that the petitioner had availed ITC fraudulently and then sought cancellation; such a petitioner is not entitled to writ relief. The petition was dismissed with costs of Rs 25,000, payable to the State Legal Services Authority.
- The petitioner is free to appeal, and the order does not affect the merits before the Appellate Authority.
Practical takeaways for taxpayers
- Cancelling GST registration does not end exposure to audit or demand for earlier periods.
- Keep books and records for the full retention period even after closing a GSTIN.
- Challenge the merits of an audit-based demand through appeal; a jurisdiction challenge based only on cancellation is unlikely to succeed.
Frequently asked questions
Can a GST audit be conducted after cancellation of registration?
Yes, for periods when the person was registered, according to the Rajasthan High Court, read with section 29(3).
Did the Court decide the merits of the demand?
No. It dismissed the writ and left the petitioner free to file an appeal on merits.
Facing a similar GST dispute?
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This summary is based on the order of the Rajasthan High Court (Jaipur Bench) in D.B. Civil Writ Petition No. 2859 of 2024. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.