M/S. Sri Avanthika Sai Venkata (Jv) vs. Deputy State Tax Officer
Original PDF →Facts
The petitioner's GST registration was cancelled without proper reasons or service of show cause notice. An application for revocation was also rejected on the same day it was filed.
Held
The Court held that the cancellation order was passed without application of mind and in violation of natural justice principles. The rejection of the revocation application was also set aside.
Key Issues
Whether the GST registration cancellation order was passed arbitrarily and without adhering to principles of natural justice. Whether the rejection of the revocation application was justified.
Sections Cited
CGST Act, 2017
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Cause title — parties, addresses and appearances
The Court made the following: ORDER
o THE HON'BLE SRI JUSTICE P.SAM KOSI{Y AND THE HON'BLE SRI JUSTICE N.TUKARAMJI VI.P.No.1596 of 2024 Q!pp!: per Ao i'ble Si Justice P.SAM KOSHY) Heard Mr. Suri Babu, learned counsel for the petitioner and Mr. K. Bhaskar Reddy, learned Assistant Government Pleader for Commercial Taxes appearing for the respondents. Perused the entire record.
The chaJlenge in the present writ petition is to the Order for Cancellation of Registration passed by respondent No.l, 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 1t.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.3463O of 2023, which stood disposed of on 26.12.2023 permitting the petiLioner to move to the respondents to seek revocation of the cancellation in terms of the provisions of the CGST Act, 2017. The petitioner thereafter moved an application for revocation on 26.12.2023 itself before respondent No.
However, on the same day, the application stood rejected leading to the filing of the present writ petition. 7
2
Learned counsel for the petitioner, at the outset, referred to the first two lines of the Order of Cancellation itself to demonstrate that the impugned order under challenge is one which has been passed without application of mind.
For ready reference, the contents of the Iirst tlvo 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 nc, reply to notice to show cause has been submitted". Referring to the aforesaid contents of the impugned order, the learned counsel fcrr 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 witi the respondents in connection to the show cause notice issued as has been contended by the authority while passing the impugned order. 6. lrarned 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 payment of returns continuously for a period of more than six monttrs, 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
3 a-l order. [,earned counsel further contends that the petitioner. also had not made any efforts for making good the default by furnishing the returns ald also paying the late fees of penalty that would be applicable wittr a request for restoration of the registration and in the absence any such efforts, the impugned order would not warrant interference at this juncture. 7 . Dealing with an issue of cancellation of GST registration, this very High Court in Writ Petition No.2567 t of 2023 decided on 03.1O.2023 relying upon the decision of the High Court of Delhi in the case of Kritika Agarwal v. Union of India and othersr held as under: 1n the case of Kritika Agarwal v. Union of India and others, wherein the High Court in the case of cancellation of GST registration had observed lhat "the mea.sure of cancellation o/ GS? must be exercised uith ciranmspection and onlg in cases, uhere it is necessary'. This in otherwise means that tl-e intention of the Honble Delhi High Court by allowing the writ petition was that the authorities concern should take a more pragmatic approach so far as tJ:e case where GST registration is concerned and cancellation should not be restored in a mechanical manner or as a matter of routine. Similar decision has also been passed by Division Bench of this Court in W.P.No.36174 of 2022 uide order dated 2O.O9.2O21, where the Division Bench had set-aside the order of the appellate authority and the matter had been remanded back for fresh consideration on its own merits."
Recently, there was yet another decision of the High Court of Bombay under similar circumstances in the case of Niral<ar I ' w.p.lq gqzqlzozz and cM Nos.36ooo/2023 &36oot/2o23
4 Ramchandra Pradhan v. Union of India and Others2 whereby a show cause notice issued for cancellation of registration and the subsequent cancellation of GST registration was subjected to challenge, wherein, the Division Bench of the High Court of Bombay in paragraph Nos;.7, 8, 9 and 11 held as under:
"
At the outset, we may observe that there apperars to be much sullstance in the submissions as urged on behalf of the petitioner', that the show cause notice dated 27,:, July 2022 issuecl tc, the petitioner itself was defective, inasmuch as, there wali no material whatsoever referred in the show cause notice as tc, why 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 that regard ought to have been furnished to the petitioner so as to invite the petitioner's reply on such serious allegation of liaud being comrnitted by the petitioner. The petitioner certainly was kept in tota-l darkness on the allegations which were sought to be raised against him so as to meet :t case being put up by the department and which was in !'act was not informed to the petitioner and/or concea-led from t.l:e petitioner. In these circumstances, there was no question of the petitioner making any ellective reply to the show cause notice dated 27n Jttly 2022. Further such basic and inherent defect in the show cause notice was also brought tc the notice of the department and was informed by the petitioner to the designated ofEcer, however, it was of no avail as no steps were taken to remeve such defect/ illegality, in the show cause notice. The impugned order dated lld November'2022 cancelling the registration of the petitioner further compounds the illegality as t]re impugned order also does not furnish any reason whatsoever in cancclling the regisr rati('n of the petitioner.
Thus, in our clear opinion, the impugned order is required to be hekl to be illegal not only on the ground of the same being in h,reach of the principles of natural justice but a-[so of the same being in breach of the principles of natural justice but also r>n tJle ground of total non application of mind, as the same is bereft of any reasons whatsoever which the law woulcl recognize to justify cancellation of the registration of the petitioner. The impug:ned order is being passed ' 2023 Yc online Bom 2182 \
-7 5 mechanically and without application of mind is clearly seen as a bare reading of the impugrred order.
For the aforesaid reasons, the impugned order is required to be held to be illegal and a tota.l nullity. It is well settled principles of law that cancellation of registration certainly meets the assessee with a civil consequence. The petilioner's registration could not have been cancel.led 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 suf{ered from an incurable defect which compels us to exercise the discretionary juri iction under Article 226 of 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 t}le respondents, there was a modus operandi on the part of the petitioner to generate and claim fa-ke ITC. If what is stated on behalf of the revenue is to be believed to be correct, in such event, the desigrrated oIficer 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 irnpugned 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 affdavit for the first time. The concerned Commissionerate needs to take a serious view of such approach of the concerned O{Iicers who are not following the law in issuing appropriate show cause notices more particularly when the issues are serious. Such deviation by the concemed ollicers 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 tie case of Tvl. Sastha Engineering Works, Rep by its Partner v. State Tax Officer (Circlef and AnotheC 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 ..-..\ I 2022 SCC Online Mad 8452 I I
6 ---E (sr) (GS'rl 2O2'l etc ., directions: arrd others (W.P.Nos. 25044, 25877, batch), dated 31.01.2022, issued the 127 38 of following "229. In the light of the above discussion, these Writ Petitions are allowed subject to the following conditions: i. 'lhe petitioners are directed to file their returns for tht: period prior to the cancellation of registration, if su,rh returns have not been already fr1ed, together witl1 ta-\: delaulted which has not been paid prior to cancellation along with interest for such belated pa'vTnent of tax and fine and fee fixed for belated frling of returns for the defaulted period under the provisions ol the Act, within a period of forty frve (45) days from the date of receipt of a copy of ttris order, if it has not been already paid. ii. [t is made clear that such pa5rment of Tax, Interest, fine 7 fee arld etc. shall not be allowed to be made or adjusted 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 sh:{l not be utilised until it is scrutinized and approved by an appropriate or a competent ollicer of the Department. iv. Only such approved Input Tax Credit shall be allowed for being utilized thereafter for discharging future ta-x liability under the Act and Rule. v. The petitioners sha.ll also pay GST and file tJ.e returns for the period subsequent to the calceilation of the registration by deciar.ing 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 approving by the respondents or any other competent authority. vii. The respondents may also impose such restrictions / limitation on petitioners as may be wa.rranted to ensure 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 tl"is order. viii. On payrnent of tax, perLalty ald uploading of returns, the registration shall stand revived forthwith. viii On pa]rment of tax, penalty and uploading of returns, the registration shall stand revived forthwith.
--7 7 ix. The respondents sha-ll take suitable steps by instructing GST Network, New Delhi to make suitabie changes in the architecture of tfre GST Web portal to allow these petitioners to file their retums and to pay the tax/penalty/fine. x. The above exercise shall be carried out by ttre respondents within a period of thirty (30) days from the date of receipt of a copy of this order. xi. No cost. xii. Consequently, connected Miscelianeous Petitions are closed."
The same has been consistently thereafter followed by tl.is Court in various decisions, viz., al M/ s.Maaruthi Foundations Priuate Limited Vs Deputg Commissioner (ST) (FAC| reported tn 2022 (5) TMI 405; Secretary/ Commissioner of Commercial Taxes, Chennai reported in 2022 (71 TMI 1226; reported in 2022 (71 TMI 7275 ; dl M/ s.Pearl and Compang Vs T'he Commissioner of Commercial Toxes in W.P(MD)No.19i27 of 2022. 6. In view of the fact that this Court has been consistently following the directions issued in tJle case of Tul.Suguna Cutpiece Vs Appellate Deputg Commissinner (ST) /GS? and others (W.P.Nos.25048, 25a77 , 1273a of 2O2l etc., batch) and ttre Revenue/Department has also accepted tJ e said view as evident from tl.e fact that no appeal has been frled in any of the matters, this Court intends to follow the above order of this Court.
In view of the same, this Court feels that the benefit extended by this Court in the earlier orders referred to above in Suguna Cutpiece Centre's case cited supra, may be extended to the Petitioner.
A plain perusa,l of the impugned order dated 1 L.O7.2022 ar.d the contents therein coupled with the statement of oath made by the learned counsel for the petitioner that the show cause dated 07.06.2022 was never served upon the petitioner nor has he I
8 submitted any reply to the said show cause notice on O8.O7.2O22 as has been contended by the authority, we are also taking note of the fact that the inrpugned order does not make a reference of the contents of the reply, if any, submitted by the petitioner. At the same time, the authorties themselves had made a statement that no such reply has been submitted by them to the show cause notice issued. To make things rvorse, the impugned order also does not disclose the grounds on rvhich the authorities concerned were compelled to issue the cancellation cf tJle registration. Therefore, the impugned order is liable to be interf,:red with this ground alone. 1 1 . Considerin-g tire above facts ald circumstalces, the impugned order dated ll.(17.2o22 and the reiection of the revocation of the order dated 26.1t>..2[23stands set .*0./orr."n"d. However, since the impugned orders have been passed without affording any opportunity of hearing to thr: petitioner, it is ordered tJlat the impugned order dated 11.07.20212 itself be treated as a show cause notice and the petitioner may enter appearance before respondent No. I and submit a detailed reply on or before O9.O2.2O24. The petitioner would also be at liberty to submit returns which they have not yet filed along with the late fees on a.pplication for delayed submission of returns so that the registration of the petitioner gets restored. Since the matter is being remitted back by this Court, the question of limitation should not come in the lvay of the petitioner or for the respondents in taking any decision on the claim of the petitioner. I
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Since the setting aside of the order dat€d 11.07.2022 would automatically restore the registration of the petitioner, it is made clear that if any Input Tax Credit (lTC) 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, miscellaneous petitions pending, if any, shall stand closed, No order as to costs. To, .A.V.S. PRASAD ASSISTANT FEGI9TRAR //// \l ,/ SECTIdI{ OFFICER 'l . Deputy State Tax Officer, Wanaparthy, Mahaboobnagar District, Telangana.
The Principal Secretary, Revenue Department (Commercial Taxes), The State of Telangana, Telangana Secretariat, Hyderabad.
One CC to SRI S. SURI BABU, Advocate [OPUC]
Two CCs to the GP FOR COMMERCIAL TAXES, High Court for the State of Telangana at Hyderabad. [OUT]
Two CD Copies BN\ BS .\*r- I l I t -'l
I I HIGH COUR'I' PSK,J & NTR,J DATED:2310112024 ORDER WP.No.1596 at 2024 ALLOWING THE WRIT PETITION WITHOUT COSTS de STAI€ :) () s 2 ttB ?[?[ (-l '7/ cA.N .C\
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.