M/S Hrc International. Through Its Prop. Sh. Sunil Kumar Treepathi vs. Union Of INDIA And Ors.
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The petitioner, M/s HRC International, sought cancellation of its GST registration effective from 30.04.2022 due to business discontinuation. The proper officer issued a notice on 28.05.2022, expressing dissatisfaction with the application due to 'MISMATCH OF ITC IN 3B/2A'. The petitioner did not reply, leading to the rejection of its cancellation application on 15.06.2022. Subsequently, another Show Cause Notice (SCN) was issued on the same date, proposing cancellation of registration on grounds of the firm's address being untraceable and the contact number not working. The petitioner failed to respond to this SCN. Consequently, the proper officer passed an order on 28.06.2022 cancelling the petitioner's GST registration retrospectively from 01.07.2017. The petitioner's appeal against this order was rejected by the appellate authority on 20.05.2024 as time-barred. The petitioner's grievance is limited to the retrospective cancellation, not the cancellation itself.
Held
The Court held that the decision of the proper officer to cancel the petitioner's GST registration with retrospective effect from 01.07.2017 violated the principles of natural justice. This was because the Show Cause Notice (SCN) did not specifically propose retrospective cancellation, and crucially, no date for a personal hearing was communicated to the petitioner, despite the SCN mentioning the possibility of an ex parte decision. The Court also noted that the petitioner questioned the ground of untraceable address, having annexed an electricity bill. In light of the respondent's concession, the Court modified the impugned cancellation order to take effect from 15.06.2022, the date of the SCN and the date from which the petitioner's registration was suspended. The Court clarified that this order would not preclude the authorities from initiating proceedings for recovery of dues or for statutory non-compliances in accordance with law. The issue of the validity of the cancellation grounds was implicitly addressed by the modification of the effective date, and the Court did not expressly leave any issue undecided.
Key Issues
1. Whether the retrospective cancellation of the petitioner's GST registration, without proposing such a retrospective effect in the Show Cause Notice (SCN) and without providing a specific date for personal hearing, violates the principles of natural justice? 2. Whether the grounds for cancellation cited in the SCN, specifically the untraceable address, are substantiated, given the petitioner's submission of an electricity bill reflecting the same address? Petitioner's Arguments: The petitioner contended that the retrospective cancellation of its GST registration was contrary to the principles of natural justice because the SCN did not propose retrospective cancellation and failed to specify a date for personal hearing. The petitioner also questioned the validity of the ground for cancellation, asserting that its address was traceable, as evidenced by an electricity bill. Revenue's Arguments: The respondent, Union of India and others, through their counsel, conceded that the impugned cancellation order should be modified to be operative from the date of the SCN, as the petitioner's GST registration was suspended from that date. They also sought clarification that this modification would not prevent authorities from initiating proceedings for recovery of dues or statutory non-compliances, including retrospective cancellation if necessary.
Sections Cited
Section 107
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$~97 * IN THE HIGH COURT OF DELHI AT NEW DELHI %
Date of Decision: 19.09.2024 + M/S HRC INTERNATIONAL. THROUGH ITS PROP. SH. SUNIL KUMAR TREEPATHI
.....Petitioner Through: Mr. Vineet Bhatia, Mr. Rakesh Kumar, Mr. Chanderkant Singh, Mr. Aamnaya Jagannath Mishra, Mr. Bipin Punia and Mr. Keshav Garg, Advs.
versus
UNION OF INDIA AND ORS.
.....Respondents Through: Mr. Puneet Yadav, Sr. Panel Counsel for R-1/UOI. Mr. Rajeev Aggarwal, ASC and Mr. Shubham Goel, Adv. Mr. Harpreet Singh, Sr. SC along with Ms. Suhani Mathur and Mr. Jatin Kumar Gaur, Advs.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE SACHIN DATTA
VIBHU BAKHRU, J. (ORAL)
The petitioner has filed the present petition, inter alia, praying that directions be issued to the respondents to cancel the petitioner’s GST registration with effect from 30.04.2022. The petitioner also impugns an order dated 28.06.2022 (hereafter the impugned cancellation order) whereby the petitioner’s GST registration was cancelled with retrospective effect from 01.07.2017. 2. The petitioner was registered under the Central Goods and Services W.P.(C) 9520/2024
Tax Act, 2017 (hereafter the CGST Act)/ the Delhi Goods and Services Tax Act, 2017 (hereafter the DGST Act) and was assigned the Goods and Services Tax Identification Number (GSTIN): 07APMPT6940H1ZC.
The petitioner filed an application dated 25.05.2022 seeking cancellation of its GST registration on the ground that he has discontinued its business due to financial problems. Pursuant to the said application, the proper officer issued a notice dated 28.05.2022 stating that the proper officer was not satisfied with the petitioner’s application. The only reason set out in the said notice dated 28.05.2022 reads as under: ‘Cancellation Details – Others (Please Specify) - MISMATCH OF ITC IN 3B/2A’.
The petitioner was called upon to file a reply to the said notice dated 28.05.2022 on or before 06.06.2022. The petitioner did not respond to the said notice. Consequently, the application for cancellation of petitioner’s GST registration was rejected by an order dated 15.06.2022. Curiously, the order dated 15.06.2022, rejecting the petitioner’s application indicates that the petitioner had furnished a reply. On the same date and time, that is on 15.06.2022 – the proper officer issued another Show Cause Notice (the SCN) calling upon the petitioner to show cause why its GST registration should not be cancelled. The only ground set out in the SCN reads as “Address of the firm is not traceable and contact number on portal not working”.
The petitioner was called upon to furnish a reply to the SCN within a period of seven working days from the date of service of the SCN and to appear for personal hearing on the appointed date and time. Additionally, the petitioner’s GST registration was suspended with effect from the date of the W.P.(C) 9520/2024
SCN, that is, with effect from 15.06.2022. The petitioner did not respond to this notice (the SCN) as well. In the given circumstances, the proper officer passed the impugned cancellation order cancelling the petitioner’s GST registration, albeit with retrospective effect from 01.07.2017. 6. On 11.10.2023, the petitioner appealed the impugned cancellation order before the appellate authority under Section 107 of the CGST Act/the DGST Act. The said appeal was rejected by an order dated 20.05.2024 on the ground that the appeal was beyond the stipulated period of limitation.
The petitioner is not aggrieved by the cancellation of its GST registration as the petitioner had also applied for the same. The petitioner’s grievance is confined to the cancellation of its GST registration with retrospective effect.
It is material to note that the SCN did not specifically propose cancelling the petitioner’s GST registration with retrospective effect. It is also material to note that the SCN mentioned that in the event the petitioner did not appear for a personal hearing at the appointed date and time, the case would be decided ex parte on the basis of available records and on merits. However, no date of a personal hearing was communicated to the petitioner. As noted, the SCN does not mention any appointed date or time for a personal hearing.
In view of the above, the decision of the proper officer to cancel the petitioner’s GST registration with retrospective effect falls foul of the principles of natural justice.
The petitioner also questions the grounds on which the petitioner’s GST registration was cancelled. According to the SCN, the petitioner’s registration was proposed to be cancelled as the petitioner’s address was not W.P.(C) 9520/2024
traceable. However, the petitioner has annexed a copy of an electricity bill reflecting the same address.
The learned counsel appearing for the respondent fairly states that the impugned cancellation order be modified to make it operative from the date of the SCN as the petitioner’s GST registration was suspended with effect from the said date. He also requests that we clarify that this order would not preclude the concerned authorities from initiating any proceedings for recovery of dues or for any statutory non-compliances, including for retrospective cancellation of the petitioner’s GST registration, if necessary.
The learned counsel for the petitioner is agreeable to the same.
In view of the above, we dispose of the present petition by directing that the impugned cancellation order shall take effect from 15.06.2022. The impugned cancellation order is modified to the said extent.
We also clarify that this order will not preclude the concerned authorities from initiating any proceedings for recovery of dues or for statutory non-compliances albeit in accordance with law.
The present petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J
SACHIN DATTA, J SEPTEMBER 19, 2024/cl
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.