M/S S.R. Steel vs. State Of U.P. And 2 Others

Held

The Court held that the cancellation of GST registration has serious consequences, including the curtailment of the right to do business and impact on Input Tax Credit (ITC) entitlement. The Act mandates a prior notice and an opportunity of hearing before cancellation. In this case, the notice uploaded on the GST portal was unintelligible, with most characters appearing as '?'. The Court found no proof of service for the claimed physical notice dated 5.4.2018 or the cancellation order dated 30.6.2018. The application by the petitioner's Chartered Accountant for reactivation did not admit service of the notice or order; in fact, it stated that the petitioner had not received intimation of cancellation. The Court noted that the GST portal continued to show the petitioner as 'active' until 15.7.2020, indicating the order dated 30.6.2018 was neither served nor given effect to. Consequently, the cancellation order was found to be ex-parte and in violation of the mandatory requirement of the first proviso to Section 29(2) of the Act. The Court lifted the bar of alternative remedy due to the violation of natural justice and the delay attributable to the State respondents. The order dated 30.6.2018 cancelling the petitioner's registration was set aside, and the matter was remitted for fresh consideration. The petitioner was directed to file a reply within two weeks, and the respondent was to fix a hearing within fifteen days thereafter and pass orders within a month.

Facts

The petitioner, M/s S.R. Steel, challenged an order dated 15.7.2020 by the Deputy Commissioner, Commercial Tax, Ghaziabad, cancelling its GST registration. The petitioner received an unintelligible show cause notice dated 5.4.2018 on the GST portal. The State claimed a physical notice was issued on the same date and an order cancelling registration was passed on 30.6.2018. However, the petitioner disputed service of both the physical notice and the order. The State relied on an application by the petitioner's Chartered Accountant dated 25.8.2018 seeking reactivation of GST registration due to technical issues preventing the filing of a revocation application. Despite the cancellation order, the GST portal continued to show the petitioner's status as 'active' until 15.7.2020, when the impugned order was served. The State argued that the impugned order merely resolved technical issues and that the petitioner had an alternative remedy.

Key Issues

1. Whether the cancellation of the petitioner's GST registration was valid, considering the unintelligible show cause notice uploaded on the GST portal and the disputed service of the physical notice and the cancellation order dated 30.6.2018, in light of the first proviso to Section 29(2) of the UPGST Act, 2017? The petitioner argued that the initial show cause notice was unintelligible and that there was no proper service of the physical notice or the cancellation order dated 30.6.2018, thus violating the principles of natural justice and the mandatory requirements of Section 29(2) of the UPGST Act. The petitioner also contended that the delay in giving effect to the cancellation order until 15.7.2020, despite the order being dated 30.6.2018, further indicated a lack of proper procedure and service. The petitioner further argued that the application for reactivation was made due to technical issues and did not amount to an admission of proper service of the cancellation notice or order. The respondent State argued that a physical notice was issued on the same date as the portal notice and that an order for cancellation was passed on 30.6.2018. The State contended that the petitioner's Chartered Accountant's application for reactivation implicitly acknowledged the cancellation and that the impugned order dated 15.7.2020 was merely to resolve technical discrepancies. The State also argued that the petitioner had an alternative remedy of appeal against the cancellation order.