M/S Shyam Sundar Sita Ram Traders vs. State Of U.P. And 2 Others

Facts

The petitioner, M/s Shyam Sundar Sita Ram Traders, filed a writ petition challenging the order dated May 17, 2021, by the Assistant Commissioner, Commercial Tax, Bareilly, rejecting their application for revocation of registration cancellation, and the subsequent order dated September 14, 2021, by the Additional Commissioner, Commercial Tax, dismissing their appeal. The petitioner had changed its business address on December 15, 2020, with the amendment approved on February 9, 2021. A survey on January 3, 2021, at the previous address found the firm not existing. A show cause notice was issued on February 11, 2021, alleging cancellation liability based on STF information that the firm was not at the registered place. The registration was cancelled on March 31, 2021, citing non-existence at the address and alleged availing of fake ITC. The petitioner's application for revocation was rejected without a prior show cause notice, stating no reply was filed to a notice dated April 22, 2021.

Held

The Court held that the respondents committed an error in deciding the issue on the ground that the firm was allegedly availing wrong ITC and was a bogus firm. The Court referred to its previous judgment in Apparent Marketing Private Limited, which held that registration can only be cancelled as per the conditions prescribed under Section 29(2), and being a bogus firm is not an enumerated ground. The Court also noted that the respondents themselves initiated proceedings against the firm under Section 74 of the CGST Act. Therefore, the order rejecting the application for revocation was a wrong exercise of power. The appellate order was also deemed bad as no such ground was mentioned before passing the cancellation order. Consequently, the impugned orders dated May 17, 2021, and September 14, 2021, were set aside. The Court clarified that the respondent is at liberty to conclude proceedings initiated under Section 74 if any. The writ petition was allowed.

Key Issues

1. Whether the cancellation of registration under Section 29(2) of the GST Act can be based on grounds not enumerated therein, specifically the alleged availing of fake ITC or non-existence at the registered address, when such grounds are not explicitly listed in Section 29(2)? 2. Whether the rejection of the application for revocation of registration cancellation, without issuing a prior show cause notice before deciding the application, is a valid exercise of power? Petitioner's Arguments: The petitioner argued that registration cancellation can only be resorted to when conditions specified in Section 29(2) are attracted. They contended that availing fake ITC is not a ground for cancellation under Section 29(2). They further argued that the respondents' stand is contradictory: on one hand, they claim the firm is non-existent, while on the other, they initiate recovery proceedings for allegedly wrongly availed ITC under Section 74, which cannot proceed simultaneously. Reliance was placed on this Court's judgments in DRS Wood Products Lucknow vs. State of U.P. and Apparent Marketing Private Limited vs. State of U.P. Respondent's Arguments: The respondent argued that at the time of the survey, nothing was found at the firm's premises, and the petitioner's relied-upon address amendment approval was subsequent to the survey, thus being an afterthought.