Bisweswar Madhya Proprietor Of Midhya Construction vs. Supt CGST And Cx Range V Haldia Ii Division And Ors

Held

The Court held that the suspension of the appellant's registration should be revoked forthwith. The reasoning was that suspending a dealer's license is counter-productive and detrimental to revenue recovery, as it prevents the dealer from issuing invoices and carrying on business, thus impacting tax collection. The Court found that the procedure of issuing a show cause notice for cancellation of registration without a prior final adjudication order quantifying the tax liability was not sustainable. The Court directed the respondent authority to forthwith revoke the suspension of the appellant's license and to issue a show cause notice within seven days from the receipt of the order. The appellant would be given reasonable time to submit objections, after which the show cause notice would be adjudicated with a reasoned order on merits. The Court explicitly stated it had not gone into the merits of the contentions raised by either side.

Facts

The appellant, Bisweswar Midhya, proprietor of Midhya Construction, filed a writ petition challenging a show cause notice dated July 21, 2022, for cancellation of his GST registration. The primary contention was that no final order quantifying tax liability had been passed. The appellant argued that the show cause notice for cancellation was unsustainable as his liability had not been quantified through adjudication. The appellant's registration had been suspended pending the adjudication. The appellant had been subjected to repeated summons by the Anti-Evasion Wing and Audit Department since January 10, 2020, but no show cause notice had been issued by these wings. The High Court noted that the department had been prolonging the matter without reaching a logical conclusion.

Key Issues

1. Whether a show cause notice for cancellation of GST registration is sustainable when there is no final order of adjudication quantifying the tax liability of the appellant? (Question of law, turning on principles of natural justice and due process in tax proceedings). Contentions: Petitioner/Appellant: Argued that the show cause notice for cancellation of registration was premature and unsustainable because the tax liability had not been quantified by a competent authority through adjudication. The prolonged issuance of summons without a formal show cause notice from the relevant wings indicated a procedural lapse. The suspension of registration was also challenged as counter-productive. Revenue/State: The judgment does not record specific arguments made by the CGST Authority or the Union of India regarding the sustainability of the show cause notice or the quantification of liability. The court noted that the department had been prolonging the matter.