Cylos Consulting Private Limited vs. Union Territory Of Chandigarh And Others

Held

The Court held that the cancellation of GST registration based solely on a single inspection where the premises were found locked and no one was present to identify the firm, leading to a presumption that the firm was not functional, is not sustainable in law. The Court noted that the petitioner had been regularly filing its returns, and such an action, without proper verification and opportunity, adversely affected the business prospects of the petitioner. The Court found the action of the respondents to be hasty and not sustainable. Consequently, the Court quashed the impugned orders dated April 9, 2022, June 29, 2022, and September 27, 2023, which led to the cancellation of the petitioner's registration. The Court restored the GST registration of the petitioner, directing them to proceed according to law and file their returns. The challenge to the refund rejection order was not pressed by the petitioner as an appeal was pending.

Facts

The petitioner, CYLOS CONSULTING PRIVATE LIMITED, had its GST registration cancelled by the respondents (Union Territory of Chandigarh and others) on March 20, 2023. The cancellation was based on an inspection where the Inspector found the premises locked and no one present to identify the firm, leading to a presumption that the firm was not functional. The petitioner's subsequent application for revocation of cancellation was rejected. An appeal against this rejection was also rejected. The petitioner then filed a writ petition challenging these orders. The petitioner had also faced a rejection of a refund claim of Rs. 10,60,000/- by the Central Goods and Service Tax Division-1, Derabassi, vide order dated February 15, 2023.

Key Issues

1. Whether the cancellation of GST registration solely on the ground that the premises were found locked and no one was present to identify the firm, without considering that the firm was regularly filing returns, is sustainable in law, particularly in light of Rule 21(a) and 25 of the CGST Rules, 2017? Petitioner's arguments: The petitioner contended that the cancellation was erroneous. They relied on the judgment in 'Gupta Enterprises vs. State of Punjab and others' (CWP-787-2024) which held that registration should be restored if the businessman has suffered financial loss and was duly represented. They argued that the cancellation was based on a single inspection and a presumption, despite the firm regularly filing returns. The petitioner also pointed out that the effect of cancellation had serious ramifications, including the rejection of a refund claim. Revenue's arguments: The judgment notes that the petitioner fairly did not press the challenge to the order rejecting the refund, as an appeal was already pending. No specific arguments were recorded for the revenue regarding the cancellation of registration itself, other than the fact that the cancellation was based on the inspection report.