Mohammed Sadiq vs. The Superintendent

Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

A perusal of the material on record will indicate that on 26.08.2022, respondent No.1 issued a Show Cause Notice to the NC: 2024:KHC:36036 petitioner calling upon him to appear on 01.09.2022 and to show cause as to why his GST registration should not be cancelled to which petitioner did not submit any reply. Accordingly, respondent No.1 proceeded to pass the impugned order dated 07.09.2022 canceling GST registration of the petitioner. Aggrieved by the same, the petitioner filed an appeal, which was dismissed as barred by limitation. Aggrieved by the impugned orders, petitioner is before this Court by way of the present petition.

Before adverting to the contentions urged by the petitioner, it would be necessary to extract Rule 86B of the CGST Rules. "86B. Restrictions on use of amount available in electronic credit ledger.- Notwithstanding anything contained in these rules, the registered person shall not use the amount available in electronic credit ledger to discharge his liability towards output tax in excess of ninety-nine percent. of such tax liability, in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds fifty lakh rupees: Provided that the said restriction shall not apply where – (a) the said person or the proprietor or karta or the managing director or any of its two partners, whole- time Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be, have paid more than one lakh rupees as income tax under the Income-tax Act, 1961(43 of 1961) in each of the last two financial years for which the NC: 2024:KHC:36036 time limit to file return of income under subsection (1) of section 139 of the said Act has expired; or (b) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (i) of first proviso of sub-section (3) of section 54; or (c) the registered person has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (ii) of first proviso of sub-section (3) of section 54; or (d) the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year; or (e) the registered person is – (i) Government Department; or (ii) a Public Sector Undertaking; or (iii) a local authority; or (iv) a statutory body:

In this context, a perusal of the impugned Show Cause Notice at Annexure-C and the impugned order at Annexure-D will indicate that the sole ground on which GST registration of the petitioner has been cancelled is by coming to the conclusion that petitioner had violated Rule 86B of the CGST Rules. However, NC: 2024:KHC:36036 details, particulars etc, as regards violation are conspicuously absent and have not been mentioned either in the Show Cause Notice or in the impugned order. So also necessary enquiry in this regard has not been conducted by respondent No.1 before passing the impugned order and consequently, in the absence of material particulars/details and necessary enquiry by respondent No.1 as regards alleged violation of the petitioner of Rule 86B having not been conducted, I am of the considered opinion that the impugned order at Annexure-D dated 07.09.2022 deserves to be quashed and direction be issued to respondent to reinstate/restore the GST registration by reserving liberty in favour of respondent to take necessary action in accordance with law.

Insofar as dismissal of the appeal filed by the petitioner as barred by limitation is concerned, since the said appeal was filed beyond the maximum period of four months ( 3+1 months), the said appeal is no appeal in the eye of law and since the appeal has been dismissed summarily as barred by limitation, the impugned order would not merge with the Appellate Authority order. Consequently, dismissal of the Appellate Authority order would not come in the way of this Court in entertaining the petition by NC: 2024:KHC:36036 exercising its juri iction under Article 226 of the Constitution of India.

In the result, I pass the following: ORDER