M/S. Smj Traders vs. The Superintendent, GST And CGST And Central Excise

Facts

The petitioner, M/s.S.M.J.Traders, represented by its Proprietor J.Syed Ismail Gani, filed a writ petition challenging an order dated 07.10.2024 passed by the Superintendent, GST & CGST, Dindigul. The impugned order cancelled the petitioner's GSTIN registration. The cancellation was based on a show cause notice dated 04.10.2024, which alleged that the petitioner was not conducting business from the declared place and was issuing invoices without supplying goods and services, in violation of the GST Act. The petitioner replied that due to financial losses, operations had ceased, and they had not formally cancelled their GST registration. They also stated they had not submitted any invoices or conducted sales/services during the period of cessation. The petitioner sought to quash the cancellation order and revoke the cancellation of their GSTIN registration.

Held

The Court held that if the petitioner were indeed trading only in bills without actual transactions, the impugned order would be unexceptionable. However, the petitioner claimed to possess proof of being a dealer, conducting business, and reflecting turnover in Income Tax accounts. The Court noted that the reply to the show cause notice lacked detailed submissions regarding the business conducted, the period of cessation, and the reasons for restarting. Considering the plea made before the Court, an opportunity was granted to the petitioner. The impugned order dated 07.10.2024 was set aside. The petitioner was directed to submit a detailed reply within two weeks, including particulars of business conducted, turnover, supporting documents, and reasons for stopping business, with supporting medical records if applicable. The respondent was to reconsider the issue and pass fresh orders. The ratio is that a taxpayer who ceased operations due to financial reasons, but has evidence of prior business and intends to restart, should be granted an opportunity to present their case with detailed documentation before their GST registration is cancelled, especially if the initial reply was not comprehensive.

Key Issues

1. Whether the cancellation of the petitioner's GSTIN registration was justified based on the allegations of issuing invoices without supply of goods and services. The petitioner argued that the cessation of business was due to personal financial conditions and not an intention to defraud the revenue. They claimed to have proof of prior business activity and turnover reflected in Income Tax accounts, and if given another opportunity, they could present documents to convince the authorities. They contended that restarting the business would be beneficial to the revenue. The respondent argued that permitting individuals like the petitioner, suspected of trading in invoices without actual supply, would be detrimental to the revenue and the system, as it enables wrongful claims.