Cancelling GST registration without clarifying how rules were violated is unjustified
In a recent judgment, the Hon’ble High Court has quashed order cancelling GST registration without clarifying how rules were violated. Mere mentioning of rules, would not give rise to a justified ground for cancellation of GST registration.
ABCAUS Case Law Citation:
ABCAUS 4039 (2024) (05) HC
In the instant case, the Petitioner assessee had filed a Writ Petition challenging the cancellation of GST registration with retrospective effect.
The Petitioner was a company. Pursuant to a survey, the Assistant Commissioner issued a show cause notice to the petitioner alleging that on the basis of information, it appeared that the petitioner’s registration was liable to be cancelled for the reasons under Rule 21(a) and 21(b) i. e. person issues invoices or bill without supply of goods or services and person does not conduct any business from declared place of business.
The petitioner submitted a reply stating that it was engaged in the business of sale and purchase of scrap material. It was stated that on the date of the said survey, the petitioner was not present in the city. The petitioner contended that it was genuinely engaged in a business and is a genuine tax payer. It was submitted that the company has a office and a go-down at its registered address. The petitioner requested for a fresh visit to his place of business and for conducting a proper investigation to ascertain genuineness of its business.
However, the registration of the petitioner was cancelled with retrospective effect by the impugned order which merely stated that the authority had examined the petitioner’s reply to the show cause notice and he was of the opinion that the registration was liable to be cancelled as per Rule 21(a) i.e. for the reason that the petitioner does not conduct any business from declared place of business.
The appeal of the Petitioner was dismissed by means of the impugned order passed by the Additional Commissioner stating that the appellant had not submitted any memo of appeal due to which, the grounds on which the petitioner was seeking restoration of his registration, could not be ascertained.
The petitioner had produced some photographs of the place of his business but the same were rejected by the Appellate Authority on the ground that the proper authority did not found any running business at the time of visit to the petitioner’s place and the photographs presented after cancellation of the registration had been managed by the petitioner.
The Hon’ble High Court opined that the show cause notice issued to the petitioner was a cryptic notice. It merely alleged violation of Rule 21(b) and 21(a). It did not make any mention of any inspection made by the proper Officer and the findings recorded on the basis of inspection. The order of cancellation of registration passed by the Assistant Commissioner, merely stated that the authority was of the opinion that the petitioner’s registration was liable to be cancelled for the reason contained in Rule 21(a) ‘person does not conduct any business from declared place of business’. The cancellation order did not take into consideration the explanation offered by the petitioner in reply to the show cause notice issued to him.
The Hon’ble High Court observed that when the order cancelling registration of the petitioner entails adverse civil consequences upon the petitioner, the order must be supported by valid reasons forming basis of passing of the order. No order having adverse civil consequences can be passed without assigning reasons for the same.
The Hon’ble High Court further observed that the Appellate Authority rejected the petitioner’s appeal on the ground that the petitioner had not filed any memo of appeal and the grounds on which he is seeking restoration of registration were not clear. The Hon’ble High Court opined that the Appellate Authority ought to have adopted the same yardstick while judging the validity of the impugned cancellation order passed by Assistant Commissioner, which also did not disclose any reason for cancellation of petitioner’s registration. The mere mention of two sub-rules, without clarifying as to how those rules are being violated and what was the material to substantiate the allegation of violation of rules, would not give rise to a justified ground for cancellation of the petitioner’s registration.
Accordingly, the Hon’ble High Court opined that the impugned orders were unsustainable in law.
Therefore, the writ petition was allowed and the orders passed by the Assistant Commissioner and order passed by the Additional Commissioner were quashed.
It was stated that the Assistant Commissioner shall be at liberty to issue a fresh notice to the petitioner and to pass suitable orders in accordance with the law after giving proper opportunity of hearing to the petitioner and after taking into consideration of the pleas taken and material relied on by him.
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