M/S.Gurunanak Merchants vs. The Deputy State Tax Officer
Original PDF →Facts
The petitioner, M/s. Gurunanak Merchants, filed a writ petition challenging the cancellation of its GST registration by the State Tax Officer (1st Respondent) on July 4, 2023. The petitioner argued that the cancellation order was issued without considering its reply dated July 1, 2023, and without providing an opportunity for a personal hearing. Furthermore, the petitioner contended that the reasons for cancellation in the order, specifically invoking Section 29(2)(e) for fraud, willful misstatement, or suppression of facts based on an email from the Director General of Goods and Service Tax (Intelligence) dated June 28, 2023, were not communicated to them. The petitioner also challenged the subsequent order dated November 17, 2023, by the Joint Commissioner (2nd Respondent) rejecting their application for condonation of delay in filing a revocation application, also without proper consideration or hearing. The petitioner sought to set aside both orders and restore their registration.
Held
The Court held that the impugned order dated July 4, 2023, for the cancellation of GST registration is not sustainable and deserves to be set aside. The primary reasoning was that the grounds for cancellation invoked in the order, specifically Section 29(2)(e) alleging fraud, willful misstatement, or suppression of facts based on an email from the DGGI, were not made known to the petitioner. The petitioner was unaware of the contents of this email. Furthermore, the show cause notice issued on June 27, 2023, cited 'reported less sales when compared to e-way bills' as the reason, which was different from the grounds in the cancellation order. This discrepancy meant the petitioner was not put on notice for the actual reasons leading to cancellation and was not granted an opportunity to explain them. The Court also noted the haste with which the proceedings were conducted, with the personal hearing scheduled before the reply period was to expire, suggesting a predetermined action. As a consequence, the subsequent order rejecting the petitioner's application for revocation of cancellation also stood set aside as the original cancellation order was per se bad. The Writ Petition was allowed.
Key Issues
1. Whether the order for cancellation of GST registration dated July 4, 2023, passed by the 1st Respondent is arbitrary, contrary to the provisions of the Central Goods and Services Tax Act, 2017, and violative of the principles of natural justice, particularly concerning the grounds for cancellation and the opportunity to be heard. 2. Whether the order dated November 17, 2023, passed by the 2nd Respondent rejecting the application for condonation of delay in filing the revocation application is arbitrary, contrary to the provisions of the Central Goods and Services Tax Act, 2017, and violative of the principles of natural justice. Petitioner's Arguments: The petitioner contended that the cancellation order was issued without considering their reply dated July 1, 2023, and without providing a proper opportunity for a hearing. They argued that the reasons for cancellation cited in the order, particularly those based on an email from the DGGI, were not disclosed to them, making the order unsustainable. The petitioner also argued that the show cause notice dated June 27, 2023, cited 'reported less sales when compared to e-way bills' as the reason, which differed from the grounds in the cancellation order. The rejection of the condonation of delay application was also challenged on similar grounds of lack of proper consideration and hearing. Respondents' Arguments: The judgment does not record specific arguments from the respondents.
Sections Cited
Section 29(2)(e)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The Court made the following: ORDER
7 THE HONOURABLT SRI WSTICE P.SAM KOSI{Y AND THE HONOURABLE SRI WSTICE N.TUKARAMJI WRIT PETITION No.1O32 OF 2024 ORD R: (per Hon'ble Sri Justice P.SAM KOSHY) Heard Mr. Shaik Jeelani Basha, learned counsel for the petitioner, Sri Rajeshwar Rao, learned Special Standing Counsel for Commercial Taxes, appearing for respondent Nos. 1 to 4 and Mr. Gadi Praveen Kumar, Iearned Deputy Solicitor General of India, appearing for respondent No.
Perused the entire record.
The instant is a Writ Petition where the challenge is to the order of respondent No. 1, dated O4.O7.2023, cancelling GST registration of the petitioner.
At the outset, learned counsel. for the petitioner drew the attention of the Court stating that the reason for which the cancellation has been done was not to the grounds which have been reflected in the show cause notice dated 27.06.2023. It was also contended that for the reasons assigned in the impugrred order of cancellation of registration, the petitioner has not been issued with any show cause notice. Thus, the impugned order on this very
z ground alone is liable to be interfered and the same is supposed to be set aside.
To understand the issue involved in the present writ petition, it would be more appropriate to look into the contents of the show cause notice that was issued to the petitioner. For ready reference, the relevant portion of the show cause notice is reproduced hereunder: 'Shou Cause lilotice for Cancellatlon of ReoistratTon Whereas on the basis of tnformation which lus come to mg notice, it appears ttat gour regi_stration is liable to be cancelled for tLe follouing reosorLs: THE REPORTED'ESS SA'ES WHEN COMPARED TO E WAY BILLS You are herebg directed to fumish a reply to tle notice within seuen uorking dags from the date of seruice of this notice. You are lerebg directed. to appear before the undersigned on 3O/ O6/ 2O23 at 1 1:OO."
To this, the petitioner immediately gave a reply on Q1.O7.2O23. Subsequently, the impugned order dated O4.O7.2O23 has been passed. It would now also be relevant at this juncture to take note of the relevant portion of the impugned order, which is reproduced hereunder: "Order for Cancellatlon of Reolstration Thi-s lcs referene to sltow cause notie issued d.ated. 27/06/2023. Wterea-s reply to tLe shou cause notie has been submitted uide AA36062303892 4 I dated O 1 / O7/ 2O2 3 and Aou/ Aour authorizcd representatiu4attended the 3 Wrsonal heaing, made a. uitten/ oral submission duing personal heaing; and uhereas, the undersigned has examined gour replg to shotu cause notice as well as submissions made at the time of personal hearing and is of the opinion that Aour registration is liable to be cancelled for follouing reason(s): Section 29(2)(e)-registration obtained bg means of fraud, uilfuL misstotement or suppression of facts CANCELLED BASED ON MAIL RECEIWD ON 28-06. 2023 AItr)NG WITH PACIIANAIIIA FROM DIRE,CTOR GENERAL OF GOODS AND SERWCE TAX INTEI.LIGENCE. D ZONE UMT
A bare perusal of the aforesaid contents of the impugrred order would clearly reflect that the reasons assigned for cancellation of registration is invoking clause No.29(2)(E) whereby it alleged that the registration has been obtained by means of fraud, willful misstatement or suppression of facts. It also reveals that the cancellation was based pretiminarily on e-mail received oo 28.06.2023 from the ollice of the Director General of Goods ald Service Tax (Intelligence), Hyderabad Zonal Unit. However, the contents of the e-mail dated 2a.O6.2O23 from the Director General were never made available to the petitioner. The petitioner is not aware of the contents of the said e-mail. 7 . It is also noteworthy to mention that in the show cause notice that was issued on 27.06.2O23, tSe.-,reason -..,-
4 /-- shown for initiating the proceedings for cancellation was reported less sales when compared to the e-way bills. Thus, it is apparently clear that for the reasons for which the registration stands cancelled by the impugned order dated O4.O7.2O23, the petitioner has not been put to notice or has been granted an opportunity to give an explanation to the same. For this reason alone, the impugned order is liable to be interdicted.
Yet another fact which needs to be considered is that the show cause notice was issued on 27.06.2023, granting seven (O7) days time to the petitioner to file reply. However, in the same show cause notice, the petitioner has already been called for personal hearing on a date much before period of frling of the reply to the show cause notice was to complete i.e., seven (07) days of time. from 22.06.2023 was coming to an end by O4.O7.2O23. However, even before waiting for the reply of the petitioners to be considered along with the show cause notice itself, the respondents had ca1l,ed the petitioner for personal hearing on 30.06.2023. This haste shown by the respondents also forces this Court to draw an inference that the entire action
7 5 of the respondents was predetermined and premeditated as well.
Recently, this Court had an occasion to deal with yet another order of cancellation of registration under similar circumstances in W.P.No.34958 of 2023 which stood allowed by this Court on 02.OL.2024. 10. For the reasons mentioned in the preceding paragraphs, we are of the considered opinion that the impugned order dated O4.O7.2O23 is not sustainable and the sarne deserves to be and is accordingly set aside/quashed. As a consequence, the subsequent rejection of the application of the petitioner for revocation also would automatically stand set aside/quashed, since the original order itself is not sustainable and per se bad. 1 1 . Accordingly, the Writ Petition stands allowed. No order as to costs, Consequently, miscellaneous petitions pending, if any, shall stand closed. . P. PADM NABHA RE Y ASSISTANT REGIS /ffRUE COPY// SECTION OFFICER To, 1. The Deputy State Tax Officer' Vanasthalipuram-ll, Hyderabad' i. iii; J"i;adommissioner, Vanasthalipuram-ll, Hvderabad'
:. if$iirp'."."#l:;:'"i""J"'"',?'(xiiB'S:'f#:Tl #;,xxt3i,1'Bi;rerariat, i$r"$t$,trmdktrliar'+h j#m""#i:,:":'#:::: ; ffifffd[!"?^'' PRAVEEN KUMAR' DEPUrysolrcrroR GENERAL GJP -_7
I I HIGH COURT DATED:1110112024 ORDER a 1HE srJ 14: o G +J 2 0 FEB 20A D6,SPArc WP.No.1032 ol2024 ALLOWING THE WRITPETITION WITHOUT COSTS .{ * t G?io, 6*- I 1 i ) I v
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.