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TMI Blog2024 (11) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... iminary audit findings dated 11 October 2024. Brief facts :- 3. The petitioner was engaged in the rental and leasing services of commercial properties and other ancillary activities relating to the same. 4. On 2 March 2019, the petitioner was issued a registration certificate under the Central Goods and Services Tax Act, 2017 (CGST Act). After conducting business since then, on 27 March 2023, the petitioner applied for cancellation of its CGST registration on the ground that they have ceased to be liable to pay tax on account of the closure of business. On 2 May 2023, the respondents passed the order for cancellation of registration, and the registration was cancelled on 1 April 2023. 5. On 6 November 2023, the respondents issued notice for conducting an audit for the period April 2021 to April 2022, although in reference, it is stated as 2020-21. The said notice was replied by the petitioner on 11 November 2023 wherein the petitioner relying upon the decision of the Madras High Court in the case of 'Tvl. Raja Stores Vs. Assistant Commissioner (ST)' (2023) 153 taxmann.com 657 (Madras) submitted that since the petitioner's registration is cancelled, an audit under Section 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the decision of the Madras High Court does not apply to the facts of the present case. Mr. Takke submitted that the preliminary enquiries of the audit have already been completed, and there are prima facie findings of tax dues in the report. Therefore, the present petition may be dismissed. 9. We have heard learned counsel for the petitioner and the respondents. The short issue posed for our consideration is whether the provisions of Section 65 of the SGST Act dealing with audit would apply to a person who was registered under the CGST Act for the period for which an audit is ordered but who ceases to be registered on the date the audit is ordered ? Analysis & Conclusions:- 10. Before we devolve upon our reasoning, it is apt to reproduce the relevant provisions of Section 2(13), Section 2(94), Section 29(3) and Section 65 of the SGST Act and Rule 101 of the SGST Rules. Definitions " 2. (13) "audit" means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings. (7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74." "Rule 101. Audit- (1) The period of audit to be conducted under sub-section (1) of section 65 shall be a financial year 1[or part thereof] or multiples thereof. (2) Where it is decided to undertake the audit of a registered person in accordance with the provisions of section 65, the proper officer shall issue a notice in FORM GST ADT-01 in accordance with the provisions of sub-section (3) of the said section. (3) The proper officer authorised to conduct audit of the records and the books of account of the registered person shall, with the assistance of the team of officers and officials accompanying him, verify the documents on the basis of which the books of account are maintained and the returns and statements furnished under the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for. The fact that only a person having a Unique Identity Number is excluded from the definition of the registered person would clearly show that for the purpose of the SGST Act, 'registered person' would include a person who at any point in time was granted registration certificate though subsequently registration may have been cancelled. 13. Even otherwise, the definition clause has to be read contextually, as provided in Section 2 itself. Therefore, in our view, the phrase 'registered person' for the purpose of Section 65 of the SGST Act and on a holistic reading of all the connected provisions which we advert hereinafter, it would mean a person who was registered at some point of time under the GST Act even though, subsequently, such registration has been cancelled. Therefore, the contention of the petitioner that for the purpose of Section 65 of the SGST Act, a registered person would not include a person whose registration has been cancelled is misconceived. 14. Section 2(13) defines "audit" to mean the examination of records, returns and other documents maintained or furnished by a registered person under this Act or Rules or under any other laws for the time being in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be accepted and is misconceived. Neither the text nor the context supports such an interpretation or construction. 18. Section 65(2) of the SGST Act provides for conducting an audit at the place of business of the registered person. However, this sub-section of conducting an audit at the place of business is discretionary since the phrase 'may' is used to qualify the audit venue. In the case of a person who has subsequently de-registered himself, an audit can be conducted at the place of the tax authorities. In the instant case, the notice under challenge, which is in accordance with Form ADT- 01, specifies the respondents' place for conducting the audit. Therefore, to suggest that in the case of an unregistered person, an audit cannot be conducted at the place of business, and consequently the provisions of Section 65 are not applicable is also not acceptable. 19. The objective of Section 65 of the SGST Act and more particularly Section 65(7) of the SGST Act for conducting the audit by tax authorities is to come to a prima facie conclusion, after giving sufficient opportunity to the noticee, about whether tax has not been paid or has been short-paid or erroneously refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the law. Preliminary audit reports also suggest short disclosure of other income, resulting in the short payment of tax. The preliminary audit report prima facie has found a total tax plus interest liability of Rs.7,01,31,710/- for the period 2020-21. In our view, the petitioner cannot escape non-facing audit proceedings in the light of these prima facie findings of the audit conducted by the authorities by taking a plea that since they have now been de-registered they are not covered by the provisions of Section 65 of the SGST Act. 23. Section 29(3) of the SGST also provides that cancellation of registration shall not discharge such person of any obligation under the SGST Act or the Rules. Section 65(5) provides that the authorised officer may require the registered person to afford him the necessary facility to verify the books of accounts or other documents and/or to furnish such required information and render such assistance for the timely completion of the audit. There is an obligation cast on a person in whose case of audit is conducted to comply with the directions of the tax authorities under Section 65(5) and these obligations are not affected even if registration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the decision of the Single Judge of the Madras High Court in the case of 'Tvl. Raja Stores' (supra). In our view, for the reasons and analysis made by us hereinabove, we respectfully do not agree with the view taken therein. The said decision has not considered the provisions in Section 29(3) and Rule 101. However, the decision does not preclude the tax authorities from initiating assessment proceedings under Sections 73 and 74 of the Act. As we have discussed earlier, provisions of section 65 of the SGST Act and the scheme thereof are in aid of sections 73 and 74. Therefore, even on this count, we respectfully disagree with the views expressed by the learned Single Judge of the Madras High Court. 27. In their preliminary audit findings dated 11 October 2024, the respondents relied upon the Rajasthan High Court's decision in the case of Ashoka Fabricast (P.) Ltd. vs. Union of India' (2024) 162 taxmann.com 719 (Rajasthan). For the reasons given above, we agree with the Rajasthan High Court's interpretation of Section 29(3) read with Section 65(1). However, the view taken by us is independent and without getting influenced by the decision cited at bar but is based on ..... 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