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December 30, 2022

Dubious GST Registration Cancellation Order Set Aside by HC

by CA Shivam Jaiswal in GST, Legal Court Judgement

Dubious GST Registration Cancellation Order Set Aside by HC

Facts and Issue of the case

The petitioner assails the cancellation of the registration of the petitioner under the GST Act, 2017, was unlawful, arbitrary, and against the principles of natural justice. The petitioner also requests a directive to invalidate the contested actions taken by the first respondent on October 20,2022.

Heard learned counsel for the petitioner Sri Bhaskar Reddy Vemireddy and learned Government Pleader for Commercial Taxes-II.

Observation

The grievance of the learned counsel for the petitioner is upset that the impugned show cause notice dated 01.10.2022 and the order for cancellation of registration dated 20.10.2022 failed to demonstrate any violations, despite the fact that the show cause notice specifically stated  “in case the registration has been obtained by means of fraud, wilful misstatement or suppression of fact sand equally in the cancellation order, it has been mentioned “On verification of GSTR 1 vs GSTR 3B returns and sales turnover, it is observed that, within a span of five months, the TRP has made purchase and sale of scrap worth of Rs.9.63 Crores for which he has not submitted clear records. Hence the transactions appear to be suspicious and hence registration is hereby cancelled (emphasis supplied)”.

Learned counsel for respondent contend that neither the show cause notice nor the contested cancellation order disclose any error, fraud, or wrongdoing committed by the petitioner in the ordinary course of his business, and as a result, document are not sustainable in the eye of law.

The learned counsel would argue that the Hon. High Court of Telangana issued an order setting aside the cancellation of the GST registration in W.P.Nos. 39498 and 39502 of 2022 due to identical circumstances. In addition, it was ordered that the Hyderabad Commissionerate’s Principal Commissioner of Central Tax investigate the behaviour and operations of the first respondent and take remedial steps.

Court have gone through the impugned show cause notice and order for cancellation of registration and found force in the submission of learned counsel for the petitioner, for, both show cause notice as well as the order of cancellation of registration are dubious enough and failing to divulge the misdeed or fraud allegedly committed by the petitioner. The order of cancellation of registration states that the petitioner has not provided “clear records,” despite the show cause notice stating that it is “in case” he has engaged in fraud, willful falsification, or the suppression of facts. Both of them are not clear enough to understand the mind of the issuing authority. Therefore, we have no demur to hold that both impugned show cause notice as well as the order for cancellation of registration are not sustainable in the eye of law. In similar circumstances, Hon’ble High Court of Telangana has set aside the impugned order of cancellation of the GST registration of the petitioner therein.

Conclusion

The writ petition is allowed and impugned order for cancellation of registration dated October 20, 2022, and show cause notice dated October 1, 2022, are hereby set aside, allowing the first respondent to issue a new show cause notice to the petitioner in accordance with the applicable laws and rules, indicating therein the clear reasons for any violations and providing ample time for the petitioner herein to submit objections or reasons and consider the same.

Read full case law given below

M/S S.A Traders V/s GST Officer

ap-hc-order-in-case-of-ms-s-a-traders-vs-gst-officer_221230_132008

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