HC Denies Order to Cancel GST Registration for Insufficient Justification
Fact and issue of the case
Rule, made returnable forthwith. Respondents waive service. By consent of the parties, heard finally.
This petition filed under Article 226 of the Constitution primarily challenges an order dated 26 April, 2023 passed by the Deputy Commissioner of State Tax, being the Appellate Authority exercising jurisdiction under the provisions of Section 20 of Integrated Goods & Services Tax Act, 2017 (for short “IGST Act”) read with provisions of Section 107 of Central Goods & Services Tax Act, 2017 (for short “CGST Act”). The issue in the proceedings pertain to the cancellation of the petitioner’s registration as granted under the provisions of the said Acts, the genesis being a show cause notice dated 22 August, 2022. The only reason as set out in the show cause notice to cancel the registration, reads thus: “In case, Registration has been obtained by means of fraud, willful misstatement or suppression of facts.” The show cause notice also has suspended the registration of the petitioner with effect from 22 August, 2022.
The case of the petitioner is that the petitioner submitted a reply to the show cause notice on 25 August, 2022 inter alia contending that the Directors of the Company had appeared before the Designated Officer and had given their respective statements as also submitted all the relevant documents. It is contended by the petitioner that as initially the documents submitted were not accepted by the department, they were forwarded by email. It is also pointed out by the petitioner that all the documents were loaded on the portal while obtaining the registration, the details of which were also set out in the reply. Further, the staff of the department had visited the petitioner’s registered place of business, as also were furnished documents. It is hence the petitioner’s case that the petitioner had cooperated with the department on all aspects.
Learned counsel for the petitioner on such backdrop would submit that the reasons as furnished to initiate an action for cancellation of the registration as noted by us above were vague, arbitrary and in breach of principles of natural justice. The petitioner has also referred to a decision of the Gujarat High Court in the case of Singh Traders vs. State of Gujarat Special Civil Application No. 6315 of 2022 dated 06.04.2022 to contend that such an action was held to be an action in breach of principles of natural justice.
Observation of the court
We also note that similar view has been taken by the Division Bench of Gujarat High Court in the case of Lakkad Brothers vs. State of Gujarat (2023) 4 Centax 364 (Guj.), as also by the Delhi High Court in the case of Quality Traders vs. Yogesh Kumar (2023) 10 Centax 150 (Del.) and by the Allahabad High Court in DRS Wood Products vs. State of Uttar Pradesh 2022(64) G.S.T.L. 132 (All.).
We are of the opinion that time and again the department is not required to be told by the Court as to what would be the position in law as also the correct approach in law, the officers needs to follow. We observe so, as repeatedly the Court being called upon to adjudicate similar issues. There has to be a sense of responsibility and accountability, any mechanical approach in this regard, even to justify such action, in our opinion cannot be the stand of the department.
For the aforesaid reasons, we have no manner of doubt that the impugned order would be required to be set aside. We, accordingly, allow this petition in terms of the following order:
O R D E R
The impugned show cause notice dated 22 August, 2022 is quashed and set aside. The consequential order dated 17 October, 2022 cancelling the petitioner’s registration as also the order dated 26 April, 2023 passed by the appellate authority quashed and set aside.
The respondents are at liberty to initiate fresh proceedings against the petitioner, however, with a direction to the designated authority that in the event a fresh show cause notice is issued to the petitioner, it ought to be in accordance with law, setting out appropriate reasons. The show cause notice be adjudicated in accordance with law after granting an opportunity to the petitioner, to place on record all his contentions, and after granting personal hearing to the petitioner.
The show cause notice be adjudicated as expeditiously as possible preferably within four weeks from the date of filing of the reply as may be directed to be filed by the petitioner.
All contentions of the parties in that regard are expressly kept open.
We also clarify that we have not precluded the respondents from exercising any other powers as may be available to the respondents in law as the facts and circumstances may warrant. Our observations are confined only to the show cause notice in question and the impugned order.
Needless to observe that setting aside the impugned order would result in the registration of the petitioner being restored. It is, however, clarified that this would not preclude the revenue from issuing any fresh order to suspend the registration as may be permissible in law.
Rule is made absolute in the aforesaid terms.
We were inclined to impose costs on the respondents, as repeatedly we are called upon to adjudicate on such orders despite our prior pronouncements making the position very clear. However, with a final hope that the respondents would adopt an approach the law would mandate, we refrain from imposing costs on the present proceedings. Hence, no costs.
Read the full order from hereMakersburry-India-Pvt.-Ltd.-Vs-State-of-Maharashtra-Bombay-High-Court2