Shree Dakornath Scrap Traders vs. State Of Gujarat
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The petitioner, Shree Dakornath Scrap Traders, filed a writ application challenging an order dated March 23, 2022, passed by the State Tax Officer, Ghatak-19, Ahmedabad, cancelling its Goods and Services Tax (GST) registration. This was the second round of litigation. In the first instance, the petitioner had challenged a show cause notice dated March 8, 2022. The High Court, on March 24, 2022, quashed that show cause notice for being vague and lacking material particulars, allowing the authority to issue a fresh one with necessary details. However, the impugned cancellation order was passed on March 23, 2022, a day before the High Court's order in the previous writ petition.
Held
The Court held that the impugned order dated March 23, 2022, cancelling the petitioner's GST registration was liable to be quashed and set aside. The Court found the cancellation order to be as vague as the show cause notice that had been previously quashed. The reasoning was that in the absence of material particulars and details, it is difficult for any individual to respond to such a notice. The Court noted the procedural anomaly that the cancellation order was passed a day before the High Court's order in the previous writ petition, which had quashed the show cause notice. The ratio decidendi is that an order cancelling GST registration must be based on specific grounds and supported by material particulars; a vague order is unsustainable. The Court allowed the writ application, quashed the cancellation order, and directed the restoration of the petitioner's registration. The Court also reserved liberty for the department to initiate fresh proceedings in accordance with law.
Key Issues
1. Whether the order dated March 23, 2022, cancelling the petitioner's GST registration is liable to be quashed and set aside on the grounds of vagueness and procedural impropriety, particularly in light of the High Court's previous order dated March 24, 2022, which quashed the show cause notice. The petitioner argued that the cancellation order, like the previous show cause notice, was vague and lacked specific details, making it impossible to respond effectively. They contended that the authority proceeded to pass the cancellation order prior to the High Court's decision on the show cause notice, which was a procedural irregularity. The Revenue did not record any specific arguments.
Sections Cited
Rule 22(1), Rule 21A(2A)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
Rule returnable forthwith. Mr. Utkarsh Sharma, the learned AGP waives service of Notice of Rule for and on behalf of the respondent.
By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs: “(a)To issue a writ in the nature of certiorari and or any other appropriate writs, order or direction quashing and setting aside the order dated 23.03.2022 made by State Tax Officer, Ghatak – 19, Ahmedabad cancelling the Goods and Services Tax Registration of petitioner and direct restoration or revival of registration of the petitioner firm; (b) To pass an ex-parte ad interim order staying the operation and implementation of cancellation order dated 23.03.2022 issued by State Tax Officer, Ghatak – 19, Ahmedabad, and stay all further proceedings pursuant to the order of cancellation of registration dated 23.03.2022 pending the hearing and final disposal of present petition; and (c) Grant such further and other interim reliefs, as this Hon’ble Court may deem fit and proper in the present nature and circumstances of the case.”
This is a second round of litigation, the writ applicant had earlier come before this Court by filing the Special Civil Application No.5984 of 2022 challenging the legality and validity of the show cause notice issued by the Authority concerned. The Special Civil Application No.5984 of 2022 came to be disposed of in the following terms:
“1. Rule returnable forthwith. Mr. Utkarsh Sharma, the learned AGP waives service of Rule for and on behalf of respondents.
We have heard Ms. Manvi Damle, the learned counsel appearing for Nanavati & Co. for the writ applicant and Mr. Utkarsh Sharma, the learned AGP appearing for the respondents.
The writ applicant is a proprietor of the proprietary concerned and he has been served with a show cause notice dated 08.03.2022 calling upon him to show cause as to why the GST registration should not be cancelled. The show cause notice is at page 14, Annexure P/1. The same read thus:
“Form GST REG-17/31 [See Rule 22(1)/sub-rule (2A) of rule21A] Reference Number:ZA240322037581Y Date: 08/03/2022 To, Registration Number(GSTIN/Unique ID): 24AQLPK9697EIZA SUNIL RAMUBHAI KUSAWAHA SHED NO.102, B/H. REVABHAI ESTATE, CHIRAG ESTATE KEVDAWADI, CTM, AMRAIWADI AHMEDABAD, Ahmedabad, Gujarat, 380026 Show Case Notes for Cancellation of Registration Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:
In case, Registration has been obtained by means of fraud, willful misstatement or suppression of facts. You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice. You are hereby directed to appear before the undersigned on 18.03.2022 at 00:00. If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits. Please note that your registration stands suspended with effect from 08/03/2022. Place: Gujarat Signature valid Date: 08.03.2022 AND SERVICE TAX NETWORK(4) Date:2022.03.08.17 IST Manubhai Keshabhai Prajapati State Tax Officer Ghatak – 19 (Ahmedabad), Range – 5, Division – 2, Gujarat”
The show cause notice is bereft on any material particulars or information. In the absence of any material particulars and the details, it is difficult for any individual to respond to such a vague show cause notice. Probably what the Authority is trying to convey is that the registration had been obtained by means of fraud, willful misstatement or suppression of facts. If such are the allegations, it is expected of the Authority to furnish some details in this regard.
The impugned show cause notice has to be quashed and set aside and the same is accordingly quashed and set aside. If the Assistant Commissioner, Ghatak – 21 (Ahmedabad), Range – 6, Division – 2, Gujarat, is of the view that the writ applicant herein had obtained the GST registration by means of fraud, it shall be open for him to issue a fresh show cause notice in a physical form and such fresh show cause shall contain all necessary information and details for the purpose of effectively responding to the same. With the aforesaid, this writ application stands disposed of. Rule is made absolute.”
Thus, while quashing the impugned show cause notice, this Court reserved the liberty for the concerned Officer to issue a fresh show cause notice in a physical form and thereafter, proceed further in accordance with law. The order passed by this Court is dated 24.03.2022. However, surprisingly, the Officer concerns proceeded to pass an order one day prior to the order of the High Court i.e. 23.03.2022 cancelling the registration. Be that as it may, the impugned order cancelling the registration is as vague as anything.
In the result, this writ application succeeds and is hereby allowed. The impugned order cancelling the registration is hereby quashed and set aside. Rule is made absolute. We once again reserve the liberty for the concerned Department to initiate fresh proceedings against the writ applicant in accordance with law. It is is needless to clarify that since the impugned show notice has been quashed and set aside, the registration stands restored. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Y.N. VYAS
Reproduced from the public record of the Gujarat High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.