M/S Bishnu Coal Briquette Industries vs. The Union Of INDIA

Held

The Court held that the order cancelling the petitioner's GST registration (Annexure P/11) was unreasoned and lacked application of judicious mind to the documents provided by the petitioner. The Court found that the order rejecting the revocation of cancellation (Annexure P/13) was also passed without considering the materials on record. Crucially, the Court noted that the physical verification conducted on March 22, 2024, during the pendency of the revocation application, was done without prior notice to the petitioner, and the Panchnama and visit notes were not supplied to the petitioner at that stage. Furthermore, the Demand-cum-Show Cause Notice (Annexure P/14) introduced new grounds for cancellation not mentioned in the original show cause notice, without giving the petitioner an opportunity to respond. The Court reasoned that these procedural lapses violated the principles of natural justice. Therefore, the Court set aside the order dated April 30, 2024, and remanded the matter back to the Assistant Commissioner for a fresh consideration. The Demand-cum-Show Cause Notice was kept in abeyance until a fresh decision is taken. The ratio is that authorities must provide proper notice, supply relevant documents, consider all submissions, and not introduce new grounds in subsequent notices without affording an opportunity to respond, especially when dealing with cancellation and revocation of registration.

Facts

The petitioner, M/s Bishnu Coal Briquette Industries, challenged a Demand cum Show Cause Notice (DRC-01) dated August 2, 2024, issued by the Assistant Commissioner, CGST & CX, Begusarai. The petitioner also challenged an order dated April 30, 2024, rejecting the revocation of their GST registration. The petitioner had been issued a show cause notice on May 18, 2023, proposing cancellation of registration due to alleged fraud, willful misstatement, or suppression of facts. The petitioner's registration was suspended on May 18, 2023. The petitioner claims to have submitted documents and requested withdrawal of suspension. Subsequently, their GST registration was cancelled on February 22, 2024, with retrospective effect from July 1, 2017. An application for revocation of this cancellation was rejected on April 30, 2024. The subsequent Demand cum Show Cause Notice proposed a penalty for availing and passing on fake Input Tax Credit.

Key Issues

1. Whether the order cancelling the petitioner's GST registration dated February 22, 2024, was passed without considering the materials on record and was unreasoned, violating principles of natural justice? 2. Whether the order rejecting the petitioner's application for revocation of GST registration dated April 30, 2024, was passed without considering the materials on record and without supplying crucial documents like the Panchnama and visit notes, thereby violating principles of natural justice? 3. Whether the Demand-cum-Show Cause Notice dated August 2, 2024, which introduced new grounds not present in the original show cause notice for cancellation, was issued arbitrarily without providing the petitioner an opportunity to respond? Petitioner's arguments: The petitioner argued that the cancellation order was unreasoned and passed without considering their submissions. They contended that the rejection of the revocation application was also arbitrary as crucial documents (Panchnama, visit notes) were not supplied, and a physical verification conducted during the pendency of the revocation application was done without prior notice. They further argued that the Demand-cum-Show Cause Notice introduced new allegations without giving them a chance to respond. Respondents' arguments: The respondents, through their counter-affidavit, vaguely denied the receipt of certain documents and stated that no records regarding their receipt were available. They relied on physical verification reports and Panchnamas indicating the non-existence of the firm at the registered address.