Vss Constructions vs. Deputy State Tax Officer

The challenge in the present writ petition is to the Order for Cancellation of Registration passed by respondent No. 1, dated O2.O8.2O23, whereby, the GST registration of the petitioner stands calrcelled with effect frorn Ol.O7 .2017 .

The impugned order reflects that the cancellation of registration was done on account of the registration having been obtained in contravention of Section 29(21(e) alleging fraud, wilful misstatement or suppression of facts.

Learned counsel for the petitioner has contended that though a show cause notice was issued on 26.05.2023 before the impugned order of cancellation of registration being passed and the contents of the show cause notice also was as vague as it could be in as much as no specific details of the alleged fraud, willful misstatement or any suppression of facts made by the petitioner not being specifred. That in the absence of which, the petitioner could not give proper effective l l

This Court, recently, in W.P.No. 1596 of 2024 decl 23.O1.2024 had allowed the writ petition setting aside the canl of registration under similar circumstances and the matl remitted back for the respondent authorities to pass an ordel ided on F"llation ter was iafresh. For ready reference, paragraphs Nos.7, 8 and 9 are reproduced herein under "7 . Dealing with an issue of cancellation of GST registration, this very High Court in Writ Petition No.25671 of 2023 decided on O3.1O.2O23 relying upon the decision of the High Court of Delhi in the case of Kritika Agarwal v. Union of ladia and otherst held as under: ,l ' w .p.lcl g+zqlzozl and cM Nos.36oo0/2o23 &36ooLl2o23

Recentiy, there was yet another decision of the High Court of Bombay under similar circumstances in the case of Nirakar 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 ald 11 held "

At the outset, we may observe that tlere appears to be much substance in the submissions as urged on behalf of the petitioner, that the show cause notice d.ated 27,h Jluly 2022 issued to the petitioner itself was defective, inasmuch as, there was no material whatsoever referred in the show cause notice as to why the petitioner was being Iabeled of having obtained registration by means of fraud, willful misstatement or suppression of facts. In our opinion, if the designated oflicer was to proceed against the petitioner on such material, deta.ils in that regard ought to have been furnished to the petitioner so as to invite the petitioner's reply on such serious allegation of fraud being committed by the petitioner. The petitioner certainly was kept in total darkness on the allegations which were sought to be raised against him so as to meet a der: un as 2 2023 scc dnLine Bom 2382

Thus, in our clear opinion, the impugned order is required to be held to be illegal not only on the ground of the same being in breach of the principles of natural justice but also of the same being in breach of the Principles of natural justice but also on the ground of total non aPplication of mind, as the same is bereft of any reasons whatsoever which the law would recognize to justify cancellation of the registration of the petitioner. The impugned order is being passed mechanically and without application of mind is clearly seen as a bare reading of the impugned order.

For tl.e aforesaid reasons, the impugned order is required to be held to be illegal arrd a total nullity It is well settled principles of law that cancellation of registration certainly meets the assessee with a civil consequence. The petitioner's registration could not have been cancelled without any reason, as no reasons were neittter set out in the show cause notice nor set out in the impr.rgned order. The show cause notice ard the impugned order suffered from arr incurable defect which compels us to exercise the discretionary juri iction under Article 226 of the Constitution of lndia to quash and set aside the show cause notice as also the impugned order based on such illegal show cause notice.

According to the respondents, there was a mod.us operandi on the part of the petitioner to generate and claim fake lTC. If what is stated on behalf of the revenue is to be believed to be correct, in such event, the designated oflicer 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 ald passing of the impugned 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 afftdavit for the 5 frrst time. The concerned Commissionerate needs to take a serious vier,v of such approach of the concerned Ollicers who are not following the law in issuing appropriate show cause notices more particutarly when the issues are serious. Such deviation by the concemed officers from deviating the following the well settled norns 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 the case of Tvl. Sastha Engineering Works, Rep by its Partner v. State Tax Officer (Circlel and Arother3 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 others [W.P.Nos. 25O4a, 25877 , 12738 of 2O2l etc., batch), dated 31.01.2022, issued the following directions: '229. ln the light of the above discussion, these Writ Petitions are allowed subject to the fo[owing conditions: i. The petitioners are directed to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, toBether with tax defaulted which has not been paid prior to cancellation along with interest for such belated pa5rment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not be€n already paid. ii. It is made clear that such pajrment of Tax, Interest, frne / fee and etc. shall not be allowed to be made or adjusted from ald out of any Input Tax eredit which may be lying unutilized or unclaimed in ttre hands of these petitioners. iii. If any Input Tax Credit has remained utilized, it shall not be utilised until it is scrutinized and approved by an appropriate or a competent officer of the Department- 3 2022 SCC Online Mad 8452

The same has been consistently thereafter followed by tJ:is Court in various decisions, viz., al M/ s.Maaruthi Foundation-s Priuate Limited, Vs Depuu Commissioner (ST) (FAC), reporled h 2022 (s) TMr a05; Secretary/ Commbsioner of Comm.erctal Taxes, ch.ennai reported. ir 2022 (71 'tMl 1226; c) TWJeyalakshmi Store represented bg its Propietor, Siuanu Pttn-dian Vs Cnmmissioner of Commercial Iqrces reported \n 2022 (71'tMl 1275 ',

In view of the fact that this Court has been and the Revenue / Department has also accepted the said view as evident from the fact that no appeal has been hled in any of the matters, this Court intends to follow the abov€ 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".

Taking into consideration the aforesaid judicial pronouncements and also considering the factual aspects as is evident in the instant case, we are of the considered opinion that the show cause notice as also the impugned order lacks information and details ab to the alleged fraud, willful misstatement or suppression of i I facts, if lany, committed by the petitioner. Therefore, it would be diflicult to sustain the said impugned order- t \ I I Foi 7 the aforesaid reason, the impugned order stands set o= aside/quashed. However, the respondents are at liber$ to issue fresh show cause notice to the petitioner if at all if they want to give the details of the allegation of charges that are found against the petitioner. To which, the petitioner is expected to give a prompt reply and thereafter, the AutJrorities shall take appropriate decision, strictly, in accordance with law.

However, it is made clear that if at all if the Department intends to issue show cause notice, they may do it within a ppriod of fifteen (i5) days, from the date of receipt of a copy of this order. If at all if the Department issues show cause notice in the said circumstances, the petitioner would not be permitted to avail the ITC which remains unutilized till the frnalization of the show cause proceedings. It is further made clear that in the event if the show cause notice is not issued within the stipulated period of fifteen (1 5) days from the date of receipt of a copy of this order, the order of restraining the petitioner to avail the unutilized ITC would automatically stand waived

In view thereof, the Writ Petition stalds allowed. Consequently, miscellaneous petitions pending, if any, shall stand closed. No order as to costs. //// HANDRA PRAKASH sTAr.<iFGISTRAR sEcrfN oFFlcER B. C ASSI To'1 Deoutv state tax officer' Tarnaka, Telangana' . a.Flmn:[:t'*:::r,l&1atY{'s*!{r{fsiif,tr.ltateorre,ansana i cii'""'cC iJs R l k. a HAN D iid5'e xil-An ar-rj-o v' Advocate [o P U C^] ; i;; dc;itoi ron cor',irrli-ntiAl fAxES, Hish court for the state ot -' Telangana at HYderabad. [OUTI

Two CD CoPies BN BSw