The cancellation of a GST registration and the denial of a revocation application without a hearing are not acceptable
Facts and issues of the case
The writ applicant is a registered company incorporated under the Companies Act, 1956 and is engaged in the trading of various agriculture products such as Castor Seeds, Jeera, Chana, Coriander, R.M. Seeds, Turmeric, Cotton Oil Cake (Kapas Khali) etc. and is also engaged in trading of Bullion derivatives on multi stock commodity exchange. The writ applicant claims to have requisite registration number under the relevant provisions of the different Acts. On implementation of the Goods and Services Tax Act, 2017, the writ applicant had applied for migrating its registration issued under the GVAT Act to CGST Act vide application dated 21.03.2017. Necessary documents along with the said application were furnished before the respondent authorities.
Initially, the writ applicant was granted provisional registration certificate on 25.06.2017 under the CGST, 2017. The final registration certificate bearing GSTN registration No.24AAICA0476H1ZU was granted with effect from 01.07.2017. Photo copy of the said certificate of the final registration is placed on record. The writ applicant claims to have regularly filed its return as required under the GST Act since July, 2017 and claims to have discharge all its liability under the law.
Inspite of the aforesaid fact, the writ applicant was served with show cause notice dated 07.03.2021 in Form GST REG-17/31 in exercise of power conferred under Section 29(2)(e) of the CGST Act, 2017 read with Rule 21 of the Central Goods and Service Rules, 2017 (for short ‘the CGST Rules, 2017’). Even the registration of the writ applicant was suspended with effect from 07.03.2021.
The writ applicant had submitted its reply on 12.03.2021 thereby drawing attention of the respondent No.2 that the Notice does not spell out any reasons or basis, on the strength of which the Proper Officer had reason to believe that the registration was liable for cancellation. The writ applicant submitted that such action of suspension of registration of the writ applicant has completely halted the business activities and thereby prayed to revoke the suspension and withdraw the show cause notice.
However, the respondent authority without considering the aforesaid reply dated 12.03.2021, proceeded to pass the order for cancellation of registration on 17.03. Being aggrieved by the aforesaid action of the respondent authority cancelling the registration of the writ applicant company, an application for revocation of cancellation of registration came to be filed by the writ applicant on 05.04.2021. The writ applicant company submitted various documents more particularly, with regard to the new addresses as approved by the department in the original registration certificate. The writ applicant company drew attention of the respondent authority that in fact the request was made for personal hearing through virtual mode in view of the prevailing pandemic situation in the month of March, 2021. However, without accepting such request, the respondent No.2 has proceeded to cancel the GSTN registration which is in violation of the basic principles of natural justice. The attention of the authority was also drawn to the instructions issued by the Central Board of Indirect Taxes and Customs vide instruction F.No.390/Misc/3/2019-JC, dated 21.08.2020 and thereby submitted that such instructions being binding upon the respondent No.2, the action of the respondent No.2 is required to be reconsidered.
In view of the aforesaid grounds being highlighted before the respondent No.3, a show cause notice dated 08.04.2021 came to be issued by the respondent No.3 calling upon the writ applicant to furnish the reply to the notice and further directed to appear for hearing on 16.04.2021.The writ applicant submitted its reply on 12.04.2021. The respondent No.3 without appreciating the reply of the writ applicant company, proceeded to pass the order of rejection of application seeking revocation of cancellation of GSTN registration.
Being aggrieved and dissatisfied with the aforesaid order of the respondent authority refusing revocation of cancellation of GSTN registration and its restoration, the writ applicant was constrained to approach the Office of Commissioner (Appeals), Ahmedabad, under Section 107 of the CGST Act, 2017. The said appeal preferred by the writ applicant was submitted on 07.05.2021. The writ applicant had once again raised specific contention that except reproducing the language of Section 29(2)(e) of the CGST Act, no worth reasons can be said to have been assigned in the show cause notice dated 07.03.2021 seeking cancellation of GSTN registration. It was further submitted that the Superintendent has relied upon the instructions received from the Preventive Section, Headquarter, Gandhinagar.
However, the said instructions were never shared with the writ applicant company and no opportunity was granted to controvert such instructions by referring to the order passed by the Assistant Commissioner. It was submitted that the order is passed on the basis of surmises and conjectures without any documentary evidence or any material whatsoever being produced or referred to by the Assistant Commissioner. It was therefore specifically contended that both the orders passed by the Assistant Commissioner and the Superintendent cancelling the registration is in complete violation of basic principles of natural justice. Upon hearing the learned counsel appearing for the respective parties as well as upon perusal of the record, the Additional Commissioner (Appeals) vide order dated 02.03.2022 proceeded to reject the appeal thereby confirming the order of rejection of application for revocation. Thus, the writ applicants have approached this Court seeking relief as prayed for.
Observation of the court
Court had heard Mr. Prakash Shah, the learned Senior Counsel assisted by Mr. Dhaval Shah, the learned advocate appearing for the writ applicants and Mr. Nikunt Raval, the learned Standing Counsel appearing for the respondent authorities.The only question that falls for our consideration is whether the order of cancellation of registration and the order passed by the appellate authority in exercise of powers conferred under Section 107 of the CGST Act, 2017 are valid and sustainable in the eye of law?
Court had heard the learned counsels appearing for the respective parties and have carefully considered their submissions. We have carefully examine the record of each of these matters. Having examined the show cause notices as well as the orders impugned in this batch of writ applications, we notice that the show cause notice issued by the respondent authority is bereft of any material particulars. Not only that, no sufficient opportunity has been provided by the respondent authority while adjudicating such show cause notice. We could not overlook the fact that all the show cause notices seeking cancellation of registration in this batch of writ applications are issued during the surge of Covid-19 pandemic i.e. in the month of March, 2021. The reply was placed on record by the writ applicant specifically requesting for personal hearing through video conferencing. In fact in the reply, the attention of the respondent authorities has been drawn to the fact that no reason or details have been furnished to respond to such show cause notice. Even the order impugned lacks the reasons. Even otherwise, the reason assigned by the respondent authority is without any basis being found in the show cause notice. Even in the show cause notice, seeking revocation of cancellation of registration, the authorities have choose to proceed on the ground other than the reason given in the original show cause notice seeking cancellation of registration. At the stage of rejection of application for revocation, the respondent authorities have failed to adhere to the basic principles of natural justice. We could further notice that the appellate authority has recorded the reasons and the findings in mechanical manner as in almost all these matters the reasons assigned and findings recorded are same, the appellate authority has failed to address to the issue of various grounds raised by the writ applicants more particularly, as regards the opportunity of personal hearing and the instructions issued by the CBIT being not adhere to more particularly, during the period of pandemic. We could further notice that the core reason considered by the respondent appellate authority while rejecting the appeal is the aspect of fake Input Tax Credit availed by the writ applicants. It appears from the reasons and findings recorded by the appellate authority that reliance is placed on the report dated 22.12.2021 submitted by the Joint Commissioner, CGST, Gandhinagar, having informed that the said tax payers did not hold any ground for revocation of cancellation of registration.
At this stage, it would be appropriate to refer to the decision rendered by this Court in the case of Aggarwal Dyeing and Printing Works Vs. State of Gujarat and Ors., Special Civil Application No.18860 of 2021 and allied matters, decided on 24.02.2022. In the aforesaid batch of writ applications, the show cause notices seeking cancellation of registration of dealers so issued lack material particulars and this Court further found that final orders of cancellation of registration so passed were bereft of any reasons. This Court allowed the aforesaid writ applications solely on the ground of violation of principles of natural justice and had further quashed and set aside the consequential final orders cancelling the registration with a liberty to the respondent authority to issue fresh Notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing and to pass speaking orders on merits. This Court had also directed the respondent authorities to cure the technical glitches and to issue a show cause notice in physical form containing all material particulars and information in order to enable the dealer to effectively respond to such show cause notice. The Court also permitted dispatch of show cause notice as well as final order in physical form by way of RPAD.
In light of the observations made by this Court in the case of Aggarwal Dyeing and Printing Works (Supra), the present writ applications succeed. The impugned show cause notices as well as the consequential orders cancelling registration and further order rejecting the revocation application seeking restoration of GSTN registration are hereby quashed and set aside.In light of the aforesaid reasons recorded in paragraph 10, we hereby quashed and set aside the order passed by the Additional Commissioner (Appeals). We further grant liberty to the respondent authority to issue fresh show cause notice with all material particulars as well as to furnish any particular piece of evidence, which the authority desires to rely upon to the writ applicant to enable the writ applicants to respond effectively to such show cause notice. We also direct the respondent authority to grant opportunity to the writ applicants to submit their reply and other supporting documents as well as to provide sufficient opportunity for personal hearing and thereafter, to pass speaking order dealing with all submissions and contentions, which may be raised by the writ applicants in the form of reply, which may be tendered before the respondent authority.It is needless to mention that we have otherwise not gone into the merits of each case. At the same time, we expect the respondent authority to follow the observations made by this Court in the case of Aggarwal Dyeing and Printing Works (Supra).
All the writ applications of the assessee were allowed by the court in the aforesaid terms.Pantone-Enterprises-Private-Limited-Vs-Union-of-India-Gujarat-High-Court