Sri. Balaraju Kappad vs. The Deputy State Tax Officer
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The petitioner's GST registration was cancelled without a proper show cause notice and opportunity to be heard. Subsequently, their application for condonation of delay in filing a revocation application was also rejected without considering their submissions.
Held
The High Court quashed the order of cancellation of registration and the rejection of the condonation of delay application. The court treated the cancellation order as a show cause notice and directed the petitioner to submit a reply and file pending returns.
Key Issues
Whether the cancellation of GST registration and rejection of condonation of delay were done in violation of natural justice principles and statutory provisions.
Sections Cited
CGST Act 2017
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The Court made the following: ORDER
To, THE HON'BLE SRI JUSTICE P.SAM KOSTTY AND THE HON'BLE SRI JUSTICE N.TUKARAMJI W.P.No.5476 of 2024 OFlf,)ER:per ,ton'rle Sn Justi.e P. sAM KOSHYI When the matter is taken up for hearing today, it has been informed by the parties that an identical Writ Petition i.e., W.P.No.1596 of 2024 has a-lready been allowed and disposed of uide order, dated 23.01 .2024. 2. In view of the fact that the identical matter has already been allowed by this Court, rve 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. As a sequel, misceilaneous applications pending if any in this Writ Petition, shall stand closed. No order as to costs. N. SRIHARI ASSISTANT REGISTRAR //' v SECTION OFFICER (Along with the copy of order daled 23.O1 .2024 '
The Deputy State Tax Officer, lvledak, IVedak District.
The Commissioner of Commercial Taxes, State of Telangana, Nampally, Hyderabad.
The Assistant Commissioner (ST), It/edak, l!4edak District.
T_he Principal Secretjrry, Revenue (CT) Dcparlment, Telangana Secretariat, Hyderabad, State of Telangana-
One CC to SRI VENKATRAI\4 REDDY tu1ANTUR, Advocate IOPUCI
One CC to SPL. SC FOR COIVIIVERCIAL IAXES [OPUC]
Two CCs to GP FOR COMMERCIAL TAXES, High Court for the State of Telangana at Hyderabad IOUTI
Two CD Copies BSR -\ , in W.P.No.1596 of 2024)
HIGH COURT DATED: 0110312024 ORDER WP.No.5476 of 2024 ALLOWING THE WRIT PETITION, WITHOUT COSTS C, ,1a==.=-::\ //'1 t )\r: S rrr rl\\- ir.io." . q,\ ''.i il\ ; ?0fiAp ig24 il; ?, i- -: o,l'r'i ',Y,,J k
THE HON'BLE SRI JUSTICE P.SAM KOSHY AND ,THE IION'BLE SRI JUSTICE N.TUKARAMJI W.P.No.l596 of 2024 Q&DER:11^ , !:, it t)t(. :;tt ,/,rrit\. p.sAM Kosrz) Hearcl Mr. Suri Babu, learned counsel for the petitioner and Mr. K. Bhaskar Reddy, learned Assistant Government pleader for Cornmercial Taxes appearing for the respondents. perused the entire recorcl.
TIrc. r'hiillengc in the present writ petition is to the Order for C:Lncellatiorr oI Rcglstration passecl by respondent No. l, dated \ I.O7.2O2'), ,.r,hcreby, the GST registration of the petitioner stands canct lk--cl rvrLlt e[k:ct frorn 1 1.06.2O19. 3. A plairr rcacling of the impugned order dated 1 1.O7.2022 would clezrrl-1' re ncct that there are no reasons mentioned which necessitated the issuance of the Order of Cancellation of Registration. The petitioner, ., earlier occasion trad filed Wp.No.34630 of 2O23, which stoocl clispcrs.cl ol o, 26. r2.2023 permitting the petitioner to move to the responrler)ts to seek revocation of the cancellation in terms of the pr.visi.rrs .l the cGS'f Act, 20r,7. The petitioner thereafter movecl an applit'rrtirrrr trrr rerr.c:rtiort on 26-12.2o23 itself before responclent No. I . I lorvt-r'r'r, on tlte sarne day, the application stood rejected learlrnu to tlrr- liling ol the present writ petition.
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Lealnecl counsel for the petitioner, at the outset, ref'erred to the first tn,o lines of the Order of Cancellation itself to demonstrate that the im1;trgnecl order under challenge is one which has bcen passcd rvithout application of mind.
For reerdy reference, the contents of the llrst trvo Lines of the impugrrecl orcler dated 17.07 .2022 itself have been rr:produccd her:ir-r u nder "'['[ris has reference to your repl_r, dated O8 07.2O22 rn reslronse to the notice to show ceruse datecl 07 06.2022 Whereas no reply to noticc to sllow cause lius ltr_,crr s ullrnittecl". Referring to the aforesaid contents of thc itnpuguccl ordcr, thc learned counsel for the petitioner submits titat at the first insta.ncc. tlle petitioner hacl not been served upon the shou, c:rnse clatcd 07.06.2022 at all and neither had the petltioner macle any rcsponse nor correspondence with the respondents in connection to thc shorv causc noticc issued as has been coutenclcd by thc autl-roritv rvhile passing the impugned order.
Leanrecl counsel for tl-re Department, howevrr. opposing tlle l)ctition submits that it appears that therc is clelault on tl-re p:rrt o[ thc pctitioner so far as furnishing of the returns. Tlrat irt tlrc cvent if there is clefault of payment of returns continlroLrsl_v fbr er periocl of lnore than six months, the proceedings lbr cancellation of'rcgistration is initiatcrl ancl this appears to be the c:rsc rvherr_' thr:r e is clr:l:trrlt olr thc p:rrt ol thc petitioner leading to the isst-r:rncc of the inrptrrl.ccl
3 order. Learned counsel further contends that l-he petitioner also had not rnade any efforts for making good the default by lLrnishing the retllrns ancl also payiug the late fees of penalty that would be applicable with a request for restoration of the registration and in the abscnce any such efforts, the impugned orcler woulcl not \ /arrant interli:rencc at this juncture.
Dealing with an issue of cancellation of GST re gistration, this ve ry l{igh Court in Writ Petition No.25671 <tf 2O23 decided on 03.10.2023 relying upon the decision of the tligh Cor-rrt of Delhi in the c:rse of Kritika Agarwal v. Union of India and others r helcl as urrcler: tn lhe case of Kritika Agarwal v. Union of India and others, wherein the High Court in the casc of cancellation of GST registration had obsenecl th.rt ..the nlcasure of cancellation of GS?- must bc: t _rerc:isccL tulth circumspection and onlg in cases, Luhere it i.s necessar3,r,,. This in otherwise means that the intention of the Hon,ble Delhi High Court by allowing the writ pctitrcln was that thc authorities concern should take a rnorc pragrnatrc approach so far as the case where GST rc'gistration is corcerned and cancellation should not bc restorecl in a mechanical manner or as a matter tll-rolrtitrc. Sirnilar clcc--ision has also been passed by Divisiorr Bcnctl of this CcrLrrt in W.P.No.36174 of 2022 urrft, or.dcr (latcd 2O.O9.2021, where the Division Bcnch hacl set irsi(lc the or clt:r- of the appellate authority and thc ruirtter hir(l l)een rtruanded back for fresh cotrsi,Jerlrtiolt ()u tts own n re rits. " 8. lir:6€.,r,h-, there was yet another clccision ol the lliijh Court of lJonrbrrv tutder similar circumstances in tlte c:rse of Nirakar w P (c) 9D4/2o)f and CM Nos.36OO0/2O23 &36007/2023
4 Rarnchandra Pradhan v- Union ol-ltrclia ancl Othersr."vhereby a show cause notice issued lor cancell:rtiorr of registration and the subsequent cancellatiolt ol- GS'f reglstration u/.ls subjected to challenge, wherein, the Division l3ench o[ the Iligh Court of Bombay in paragraph Nos.7, U, 9 ancl I I hclc{ as undcr:
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At the outsct, we mit1. obsenc that therc appears to be much substance in thc subntissions as urgecl on behalf of the petitioner, that the shorv caLLst, rroticc d:rted 271h Jrtly 2022 issuecl lo lhe pctilioner irs,.rl rrrrs (lclcctive. inasmuch as, ther-e was no matr:i ial \\,ltatso(,vtt r t,lerr cd in thc show cause noticc as to rvhy the 1tctitiorrcr r,r,rrs being labeled of l.raving obtainecl rcgistration b_r, urr::rns of Ii irrrcl, r,villful missttrtement or supprcssion of la( ts. ln ()ur' ()piniorr, if the dcsignated officer was to proceed ullnil)s1 tllr 1tr:Litroner on such material, details in ihat regard oLrehr [.] l.rave bccn furnishcd to the petitioner so as to invile thc l)(trLioner's rcp11, on such serious allegation of frar-rd l)crng c()|rnutle(l b\ the petitioner. The petitioner certailtl-v s'as l<t:pt iu totirl clar kne ss on the allegations rvhich rvcr-c sougllt l() bc rlised against him so as to meet a casc beilg ltrrt rrlt l,,r' tltc (larl)artntcnt trncl which was in ftrcL was l)ol intirlrnttl l() tlrc pellLioner and/or concealed from thc pelilioncr lrr thesr'circumstances, there was no question of thc lreti oncr Lnulirng any eltective reply to the show causc noticc datcrl 27, ' Ju\'2022. Further such basic and inherer-rt (tclcct llt tlrr. slrorv c:rusc notice u,as also brought to tltc noti(:e of ttrc (l(,pirt trltcnl lrnd rvas informcd by the petitioner to the desigDirled o11l<:t'r, holever, it w.rs oI no avail as no steps wcre taken to rcrno\.e such delect/ illegality, in the shorv causc notic(, 'l'lr<. irrrprrgnr.d order dated 11th November 2022 cancellrng tlr(. resistration of the petitioner further- compounds the illeg:rlirv irs tht: rrrpugned order also does not furnish an1, ra:irsort rvlriitsot,r,t:r in cancelling the regislriltion of ll)(. p,.tlrr,)rr, l
Thus, in our clc:rr oltirrrorr, ,.lrc rrnprrgrrcd ordcl is required to be held to be illcgrLl not ()nlv on the qlound of the same being in breach ol lhc 1>rrncilrles ()l l)aturirl justice brrt also of the san-re being ir-r brciLclr of 1lr( l)r rncrl)les o[ natural justice but also or the gr()urr(l ()l 1()iitl rr()rr lpplication ol'nrind, as the sarne is i;erel-t ol-lrrr\ ftlrsorrs \\'l)it(socver r,,,ltich the law wor-rld recognize to .lrrstrt\' ( irU('ellirtlolt of lhe rcqistr:rtion of the petitioncr. '['lrt irrrl.rr-rrirrcrl orlr:r is bcing passed ') 2023 scc Online Boin 2382
mechanically ancl tvithout arpplic.rtiolt of lurncl is clearly seen as a barc reading of the inrptrgrrr.cl or tler.
For the albresaicl reitsons, thc irrrpugnecl order is required to be held to be illegal and a toral nullity. lt js rvell settled principles oI law that cancellaLiorr oI registration certainly meets the asscssec with a civil c()nsc(lucnce. .lhe petitioner,s registration coulcl not have bccn carrcellccl wilhout any reason, as lto reasons were neither set ()ut in the show can-rse noticc nor set out in thc irnpugncd order. The show cause notice and the impugned orcler srrll-ered frorn an incurable delect rvhich cornpels rrs to excr-cise tl-re discretionary juri iction uncler Articlc 226 ol' tlte Constitution of India to quash and set aside the sho[, (.ar.]se nolice as also the impugned order b.rsed on such illcgal shour cause notice.
According to the resl;on(lcnts, thcrc was a modus operandl on the J]art of tlrc pctrlroDt-r 1() ger]erete and claim fake I'l'C. If rvhat is statcd on bctr;rll-of the revenue is to be believecl to be correct, in srrch cvrnt, thc rlcsignated ofhcer should have been ntore ctLrcful .rrrcl rorrlcl not havc been so carcless in issuing sLtch dcle(.tlv(, slrorv cause notice. The impugued actron in issuitrg srrclr shorv c:rusc notice and passing of thc intPugnc.l orcler tlrcr.corr, lras in fact proved counter-productive to the int(,rcs( of revenue, if the department is corrcct irr rts cuse .rs [)ut rLp in the reply affidavrt for the first tirne . 'l'he c.onr.cr ncd Commissionerate needs to take a serious vierv ol- srrch approach of the concerned Officers who are not tbllou,rng tl.rc Iaw in issuing appropriate show causc notices ntrire parlicularlv when the issues are serious. Such rler,,iatirrn l)\' tlrc concernecl officers from deviating the lbllorving rh,. 1is11 settlecl norms and procedures, in fact wrtrrlcl ltenctlt lrrr llssessee if there is material that he rvas comrnittecl illegrrlirics.,,
Likewise, there is yet another c.lccision ll-orn the High Court of Madras in the case of Tvl. Sastha Engineering Works, Rep by its Partner v. State Tax Officer (Circle) and Another3 wherein the High Court of Madras in paragraph Nos.4 to 7 has helcl :rs under:
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It is subrnillcrl b,y tl.re lelrnerl (.()uns(.1 lirr the petitioner that in identicirl r.ircu nr s tirncc:;, lltis Ctoult, in thc case of 'lvl.Suguna Cutltit,cc Vs'l'lrt: Appr:llrrtc l )r.1rru_r Cor.nmissioner 2022 SCC OnLine Mad 8452
() (sl) lci s'r') 202 I ctc , (lirccl lo n s: iur(l ()tlrers (W. P Nos. 25048, 25a77, 12738 of following ",1 "219 ln rlrc liqht of the tLbove discussion, these Writ l)clili()ns at t' iLll6r.r.'c.cl subject to the following conditions: i. '[']re Petitioncrs are drr-ected to file their returns for thc pelrod prior to the cancellation of registration, if srlch rcturns ltirvc not becn already filed, together lvith tax tlelarrlterl rvlrich has not been paid prior to (':urc(llirti(ln along r.vith interest for such belatecl pa_vnrcrlL of rax :rnd fine and fee hxed for belated filing ol retLu ns lbr ttre defaulted period under the provisions o[ thc r\(:t, rvittrin a period of forty five (45) days from tlrc rlrrlc of re(.eipt of :t copy of this order, if it has not lrc:r:n lrlr t.irdr, 1-raicl, ri. Il rs rrrrrlc ('l(,ar thert sucl-r payment of Ta,x, Intercst, lirrc / ti.e rrrrrl t,t<:. slrall r-rot be :rllowed to be made or acljusttrl 1l-orrr itrrc[ oLrt of :rny Input Tax Credit whicl.r rrrar' lrc l_r'irrq rrnrrtilizecl or unclaimed in the hands oI t lrt:sr' ltcL ittoncr-s rir. Il arrv Ir)[)Lrl 'l'.lx Credit has remained utilized, it slr:rll rtrrt lrc rrtiliscd until it is scrutinized ancl itpprolr'cl lrr. itti ir1>1troltriatc or a Competcnt ofhcer of t lre l)Cl)irL ttll( nt iv C)[h, srrc.lr aPprovecl Input Tax Credit shall be allorvrcl lirr lrcrng utilized thereafter for discharging linrur".,r Ir.rl,rlitr rrrrder Ilte Acl and Rule. \, 'l'he l)rt rl ror)ers shall also pay GST and file the relrrrrrs lirr tl)e l)eriod subsequent to the cancellation ol- tlrc rcgrstration by dcclarring the correct value of su1;plrcs rrrrcl prr-r'rlcnt of GST shall also be in cash. vi. fi rrrrv Irrl)u t 1'.rx Credit was earned, it shall be irllorvt,rl to lrr LLtiliscrl orrly after scrutinising and irl)l)r()viltli liv llre lt,slronclt:nts or any other cornpetent irLltlr()r'ilv r,ii. 'llrc Lcs;ron(lcuLs ntay also impose such restrictions / lruiLtrrtLorr o [)(,titioncls .rs may be warranted to cnsur(' []rirl 1trt,r'r,' is no undue pu.ssing o[ Input Ta_y (lr crlrL 1x.rrrlin5,, sirclr t,xcrcrsc and to ensure that there is no vrolirtiorr o, iln ittfcmpt to do bill trading b5. llikirrg rrrlr.,rrrrlir!r, ()1 tllis olck:r. viii. On payment of ta_\, 1renaltv iLrrrl Lr1rlolrclrng ()l rcIL]rns, the registration shalJ s1a rrcl r r-r rr (,il lirr tlr\.it lt. viir. C)rr l)i r\ rur nt o1- tir\, penalty and uploading of relLrrns. th( r!,qrstllltlorr shirll stand revived forthwith.
't 1 ix. The respondents shall take suitable steps by instructing CST Netrvork, New Delhi to make suitablc (--hanges in the architecture of the GST Web portal to Itllow these pctitloners to file their returns and to pay tlre tax/ per)alty/ llne. x, The above exercise sh:Lll be carried out by the respondents urithin a period of thirty (3O) days from the date of receipt of a copy of this order. xi. No cost. \rr. Conseqllently, collrlected Miscellaneous petitions are closcd." 5. 'ltrc samc has been consistently thereafter followed by this C ul r tn varior rs tlccisions. viZ., itl M/ s. Lluaruthi Foundatiorts piuate Limited Vs Deputy (lomnri-s.sioner (S't) (FAC), reported in 2022 (5) TMI a0S; tr,) ./. .Iaqctkrishttan U.s The Additionat Chief S e c r e t a r ry / C o rrtrni-ss ioner of Co rnme rcial T axe s, Che nnai rcportc(l tt 2022 17) TMI 1226; <) TVL ,lc.qalokshml Storc represented bA its propietor, Sruartu Pnrtdian V,s Conrnis.sioner of Commerciai Taxes rcporterl lt 2022 (7) "fMI D7 5 ; tll M/ s. t earl and Compang Vs The Comrnissioner oJ' Oomrrrc:rcictl ?are-s in W.P(MD)No. 19i27 of 2022. 6. In r.ii:ri. o[ the fact that this Court has been consistently lirllrrrving the rlircctions issued in the case of Tul.Suguna Crltpicct: Vs Appellate Deputg Commisstoner (ST) /GSIi and otlrers (W,P.NOs.25O48, 25a77, 1273a of 2O2l etc., batch) arrrl t lrc Reventrc/ Department has also accepted the said view as cvrdcnt fronr thc lact that no appeal has been filed in any ol thc ru.rtters, Lltrs Court rntetrds to follow the above order of liris ( ()rlrt. 7. ln vicu, ol the sarne, this Court feels that the benefit cxtcuclc(l by lhrs CoLrrt in the earlier orders referrecl to above rn Sugrrnil Crrlpir-'ce Centrt-- s casc cited supra, may be r'xtc nrlr.rl to tll(.PcLitioncr. 1O, A 1;lrtirr p<:rusal of the impugned order dated 1I.O7.2022 arul the contcltts tlrcrein c()Ltplecl r,vith thc stzr[ement of oath m.rde by thc learnccl r:oLrnst'l lirr- the petrlioner that the show cause datecl 07.06.?(Y22 \\,:rs never served upon the petitioner nor has he
8 subnltte(l an),reply to the saici show calrse notice on 0g.O7.2022 as has been con tencled by the authority, we are also takine note o[ the fact that the impugned order <loes not make a ref-er.ence o[ the contents of the reply, if any, submitted by the petrtroner. Ar the same timc, tl-rc authoritics themselves had madc a stateme nt t hat no sllcll reply iras becn submittecl by them to the show cause,otrce issr-rr_,cl, To make things worse. the impugned order arso does not chscrose the grotrncls on rvhich the authorities concerned were compelled to rssne tl-rc c:Lrrccllation of ,re registration. Therefbre, the r,ltugrrccl orcler is liablc to Lrc interfered rvith this grouncl alone. I 1. Consiclerir-rg tl,re above facts and circumstances, tlte impugned order dirtecl 11.O7.2022 and the rejection of tlte rerrocatior.r ol the orclr:r cl:rtccl 26.12.2023 stands set aside/quashed. Howc'cr, sincc tl.re impugnccl orders have been passed without afforc.ling:1i1_y opportrutitv of hearing to the petitioner, it is ordered that the impugned order datecr 1 r 'o7 '2022 itserf be treated as a show cause ,oti.e ancl the petitiorler nray enter appcarance before responclent No.1 arnd submit a det:rilccl repr-r, on or before og.o2.2o24. -lhe petitio.er rvo,ld also be arl [iltr:rt_1, to strbmit returns which they have not _r,ct filccl along s,ith thc latr: lecs on :rpplication for clelayed submission .t retur ns so th.rt the rerrist rat io.r of the petitioner gets restore(l. slrce t]rc lnattcr is l;ci.g r-e.'ri ccl baci< l;y this Court, the qucstiort,f. Iir,itatior.r shoLrlcl not ( ()rnc i' the rvay or trrc petitioncr or for trre r cs,..crcrrts i. t:rkirs :rrr,v clr.cision <>n tl.rc cl:rim of the petitioner.
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Since the setting aside of the order dated i I .o7 .2022 woulcj autornatically restore the registration of the petitioner, it is made clear that if any Lrput Tax Credit (ITC) remains unutilizecl, the petitioner srralr ,ot be permitted to utilize the same t,r the finarization of the show cause proceedings as directed above.
In vrew thereof, the Writ petition stancls:rllowed. Consequently, miscellaneous petitions per_rding, if any, shall stancl closccl. No order as to costs. L)a1r:cl Put 23.o1.2024 P.SAM KOSHY, J N.TUKARAMJI, J
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.