M/S. Sri Sai Venkata Ramana Constructions vs. Superintendent Of Centra Tax Officer

The Superintendent of Central Tax Officer, Wanaparthy, Mahaboobnagar District, Telangana.

The Principal Secretary, Revenue Department (Commercial Taxes), State of Telangana, Telangana Secretariat, Hyderabad.

One CC to SRI S.SURI BABU, Advocate. [OPUC]

One CC to SRI DOMINIC FERNANDES, (Senior Standing Counsel For cBrc). toPUCl

Two CD Copies. (Along with a copy of the Order, dated 23-01-2024, in W.P.No.1596 of 2O24 to this order AD To, BSK BS "\ }/ COMMON ORDER'.(per Hon'ble Sri Justice P.SAM KOSHY)

In view of the fact that tJle identical matter has already been allowed by this Court, we are inclined to allow this Writ Petition in terms of the order passed in W.P.No. 1596 of 2024 decided on 23.O1.2024 on similar terms. ////

The challenge in the present writ petition is to the Order for Cancellation of Registration passed by respondent No. 1, dated 11.07 .2022, whereby, the GST registration of the petitioner stands cancelled with effect from 11.06.2019. 3. A plain reading of the impugned order dated 17.O7.2022 would clearly reflect that there are no reasons mentioned which necessitated the issuance of the Order of Cancellation of Registration. The petitioner, on earlier occasion had filed WP.No.34630 of 2O23, which stood disposed of on 26.12.2023 permitting the petitioner to move to the respondents to seek revocation of the cancellation in terms of the provisions of the CGST Act, 2077 . The petitioner thereafter moved an application for revocation on 26.72.2023 itself before respondent No.

Learned counsel for the petitioner, at the outset, referred to the first two lines of the Order of Cancellation itself to demonstiate that the impugned order under challenge is one which has been passed without application of mind.

For ready reference, the contents of the first two lines of the impugned order dated 11.O7.2022 itself have been reproduced herein under: "This has reference to your reply dated O8.O7.2O22 in response to the notice to show cause dated 07.06.2022. Whereas no reply to notice to show cause has been submitted". Referring to the aforesaid contents of the impugned order, the learned counsel for the petitioner submits that at the first instance, the petitioner had not been served upon the show cause dated 07.06.2022 at all and neither had the petitioner made any response nor correspondence with the respondents in connection to the show cause notice issued as has been contended by the authority while passing the impugned order.

Learned counsel for the Department, however, opposing the petition submits that it appears that there is default on the part of the petitioner 'so far as furnishing of the returns. That in the event if there is default of pa5rment of returns continuously for a period of more than six months, the proceedings for cancellation of registration is initiated and this appears to be the case where there is default on the part of the petitioner leading to the issuance of the impugned

Recently, there was yet another decision of the High Court of Bombay under similar circumstances in the case of Nirakar ' w.p.lcl gqzq/zoz3 and cM Nos.36oool2o23 &36@1/2023 7

At the out.set, we may observe that there appears to be much substar.ce in the submissions as urged on behalf of the petitioner, thert the show cause notice dated 27th J.ulv 2022 issued to the petitioner itself was defective, inasmuch as, there was no material whatsoever referred in the show cause notice as to rvhy the petitioner was being labeled of having obtained registration by means of fraud, willful misstatement or suppression of facts. In our opinion, if the designated officer was to proceed against the petitioner on such material, details in thrLt regard ought to have been furnished to the petitioner so as to invite the petitioner's reply on such serious allegation of fraud being committed by the petitioner. The petitioner certainly was kept in total darkness on the allegations waich were sought to be raised against hiln so as to meet a case being put up by the department ancl which was in fact was not informed to the petitioner and/or concealed frcm the petitioner. In these circumstances, there was no (lueslion of the petitioner making any effective reply to the show oause notice dated 27th Jr:-ly 2022. Further such basic and inherent defect in the show cause notice was also brought to the notice of the department and was informed by the petitioner to the designated oflicer, however, it was of no avail as no steps were taken to remove such defect/ illegality, in the show cause notice. The impugned order dated l lth November 2r)22 cancelling the registration of the petitioner further compounds the illegality as the impugned order also does not furnish any reason whatsoever in cancelling the registration ,rf the petitioner.

Thus, in our clear opinion, the impugned order is required to be held to be illegal not only on the ground of the same being in breach of the principles of natural justice but also of the same being in breach of the principles of natural justice but also on the ground of total non application of mind, as the same is bereft of any reasons whatsoever which the law would recop;nize to justi$r canceilation of the registration of the petitioner. The impugned order is being passed '2023 scc Online Born 2382 \

For the aforesaid reasons, the impugned order is required to be held to be illegal and a total nullity. It is well settled principles of law that cancellation of registration certainly meets the assessee with a civil consequence. The petitioner's registration could not have been cancelled without any reason, as no reasons were neither set out in the show cause notice nor set out in the impugned order. The show cause notice and the impugned order suffered from an incurable defect which compels us to exercise the discretionary juri iction under Article 226 ol the Constitution of India to quash and set aside the show cause notice as also the impugned order based on such illegal show cause notice.

According to the respondents, there was a fiadus operandi on the part of the petitioner to generate and claim fake iTC. If what is stated on behalf of the revenue is to be believed to be correct, in such event, the designated officer should have been more careful and could not have been so careless in issuing such defective show cause notice. The impugned action in issuing such show cause notice and passing of the impugned order thereon, has in fact proved counter-productive to the interest of revenue, if the department is correct in its case as put up in the reply affidavit for the first time. The concerned Commissionerate needs to take a serious view of such approach of the concerned Officers who are not following the law in issuing appropriate show cause notices more particularly when the issues are serious. Such deviation by the concerned officers from deviating the following the well settled norms and procedures, in fact would benefit an assessee if there is material that he was committed illegalities."

Likewise, there is yet another decision from the High Court of Madras in the case of Tvl. Sastha Engineering Works, Rep by its Partner v. State Tax Officer (Circlef and Another3 wherein the High Court of Madras in paragraph Nos.4 to 7 has held as under:

It is submitted by the learned counsel for the Petitioner directions: ;rnd others (W.P.Nos. 25048, 25477, batch), dated 31.01.2022, issued the 12738 of following "229. In the light of the above discussion, these Writ Petitions erre aliowed subject to the following conditions: i. 'lhe petitioners are directed to file their returns for the pr:riod prior to the cancellation of registration, if such returns have not been already {i1ed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been ;Llready paid. ii. It is made clear that such pa1'rnent of Tax, Interest, fine / fee and etc. shall not be allowed to be made or acljusted from and out of any Input Tax Credit which may be lying unutilized or unclaimed in the hands of these petitioners. iii. If any Input Tax Credit has remained utilized, it shall not be utilised until it is scrutinized and appro'red by an appropriate or a competent o{ficer of the Department. iv. Only such approved Input Tax Credit sha-ll be allowed for being utilized thereafter for discharging future tax liability under the Act and Rule. v. Thr: petitioners shall also pay GST and file the returns for the period subsequent to the cancellation of the regrstration by declaring the correct value of supplies and payment of GST shall also be in cash. vi. If any Input Tax Credit was earned, it shall be allowed to be utilised only after scrutinising and appro'ring by the respondents or any other competent autho.:itv. vii. The respondents may a-lso impose such restrictions / limitation on petitioners as may be warranted to ensurr: that there is no undue passing of Input Tax Credit pending such exercise and to ensure that there is no violation or an attempt to do bill trading by taking advantage of this order. viii. On payment of tax, penatty and uploading of returns, the registration shall stand revived forthwith. viii. Ch pa)'rnent of tax, penalty and uploading of returns, the registration shall stand revived forthwith.

Since the setting aside of the order dated I1.O7.2O22. would automatically restore the registration of the petitioner, it is made clear that if any Input Tax Credit (ITC) remains unutilized, the petitioner shall not be permitted to utilize the same till the finalization of the show cause proceedings as directed above.

In view thereof, the Writ Petition stands allowed. Consequently, rniscellaneous petitions pending, if any, shall stand closed. No order ir.s to costs. P.SAM KOSHY, J N.TUKARAMJI, J Dated: 23.O1.2024 Put I