Khodiar Export Import vs. State Of Gujarat
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The petitioner, Khodiyar Export Import, a proprietary concern engaged in trading tobacco products, had its GST registration cancelled. The cancellation was initiated by a show cause notice dated 10.07.2020 from the Assistant Commissioner, GST, Anand, citing non-filing of returns for a continuous period of six months. The petitioner appeared before the Assistant Commissioner, but an order cancelling registration was passed on 21.07.2020. The petitioner appealed this order. The appellate authority, the Deputy Commissioner of State Tax, Vadodara, dismissed the appeal on 17.11.2021, relying on a spot visit report which indicated no business activity at the stated place of business and discrepancies in the nature of business (Farsan vs. Bidi sales). The petitioner then filed a writ application before the High Court challenging both the cancellation order and the appellate order.
Held
The Court held that the entire procedure adopted by both the Assistant Commissioner and the appellate authority was in absolute violation of the principles of natural justice. The show cause notice was issued on the ground of non-filing of returns, but the appellate authority considered a spot visit report, which introduced new grounds (no business activity, discrepancy in business type) without giving the petitioner a chance to respond. The Court found the order of cancellation passed by the Assistant Commissioner to be a non-speaking order. Consequently, the writ application was allowed. The impugned order of the appellate authority dated 17.11.2021 and the original cancellation order dated 21.07.2020 were quashed and set aside. The GST registration was ordered to be revived automatically. The petitioner was permitted to file returns with appropriate penalty and interest. If the full amount towards tax, penalty, and interest was not deposited within two weeks, the respondent could pass a fresh order cancelling the registration. The Court also left it open for the authorities to undertake spot inspections in the future in accordance with law.
Key Issues
1. Whether the order of cancellation of GST registration dated 21.07.2020 passed by the Assistant Commissioner is a speaking order, as required by principles of natural justice and statutory provisions? 2. Whether the appellate authority, in dismissing the appeal, acted in violation of the principles of natural justice by relying on a spot visit report without providing the petitioner an opportunity to respond to it? Petitioner's Arguments: The petitioner argued that the order of cancellation of registration was absurd, non-speaking, and bereft of material particulars. They further contended that the appellate authority considered a spot visit report, which was not part of the show cause notice, and dismissed the appeal without giving the petitioner an opportunity to address the findings of this report, thereby violating principles of natural justice. Revenue's Arguments: The judgment does not record any specific arguments made by the revenue or state. It notes that advance copy was served to the Government Pleader/PP for the Respondent.
Sections Cited
Rule 22(1), Section 107(11)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
With the consent of the learned counsel appearing for the parties, the matter is taken up for final hearing.
Rule returnable forthwith. Mr. Utkarsh Sharma, the learned AGP waives service of notice of rule for and on behalf of the respondents.
By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs: “A. This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside impugned order dated 17.11.2021 (annexed at Annexure – A) as well as order dated 21.07.2020 (annexed at Annexure – C); B. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith C/SCA/5220/2022 ORDER DATED: 16/03/2022 restore the registration certificate of the Petitioners under the GST Acts; C. Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to stay the operation, execution and implementation of impugned order dated 17.11.2021 (annexed at Annexure A) as well as order dated 21.07.2020 (annexed at Annexure C) and the Respondents may please be directed to forthwith restore the registration certificate of the petitioners under the GST Acts; D. Ex parte ad interim relief in terms of prayer C may kindly be granted; E. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.”
The facts giving rise to this writ application may be summarized as under:
1 The writ applicant No.1 is a proprietary concern having its place of business at Borsad, District : Anand. The writ applicant No.2 is the proprietor of the proprietary concern. The firm is engaged in the business of trading in Tobacco/Tobacco products. At one point of time, the firm was registered under the provisions of the Goods and Services Tax Act, 2017 (for short ‘the Act, 2017’).
2 It appears that the firm was unable to file few monthly returns under the Act, 2017 as payment of tax is a pre- requisite for acceptance of the returns on the GST Portal. In view of the aforesaid, a show cause notice dated 10.07.2020 came to be issued by the 3rd respondent to the writ applicants calling upon the firm to show cause as to why the registration certificate should not be cancelled on the ground of non filing of the returns. The show cause notice reads thus: “Form GST REG-17 [See Rule 22(1) C/SCA/5220/2022 ORDER DATED: 16/03/2022 Reference Number: ZA2407200384971 Date: 10/07/2020 To, RAJESHKUMAR BHIKHABHAI PATEL
Jokabhai S Khadki, Borsad, Anand, Gujanit, 388140 Show Cause Notice 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:
Any taxpayer other than composition taxpayer has not filed returns for a continuous period of six months. You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice. If you fail to finish 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. Place: Gujarat Date: 10/07/2020 MITULKUMAR MAHENDRA KUMAR RATHOD Assistant Commissioner Ghatak 51(Anand)Range-13: Division-6 Gujarat”
3 It appears that the proprietor of the firm appeared before the respondent No.3 and tried to make good his case for discharge of the show cause notice. However, the respondent No.3 proceeded to pass the order cancelling the registration dated 21.07.2020. The order reads thus: “Reference Number: ZA2407200843081 Date: 21/17/2020 To RAJESHKUMAR BHIKHABHAI PATEL Jokabiais khadki Borad Borsad Anand Guj388140 GSTIN UIN 24ANXPPRIZR Application Reference No. (ARN: AA340720033812M
Dated: 10/07/2020 Order for Cancellation of Registration This has reference to your reply dated 21/07/2020 in response to the notice to show cause dated 10/07/2020 Whereas no reply to notice to show cause has been submitted; C/SCA/5220/2022 ORDER DATED: 16/03/2022 The effective date of cancellation of your registration is 01/12/2019 Determination of amount payable pursuant to cancellation: Accordingly, the amount payable by you and the computation and basis thereof is as follows: The amounts determined as being payable above are without prejudice to any amount that may be found to be payable you on submission of final return furnished by you. You are required to pay the following amounts on or before 31/07/2020 failing which the amount will be recovered in accordance with the provisions of the Act and rules made thereunder. Head Central Tax State Tax/UT Tax Integrated Tax Cess Tax 0 0 0 0 Interest 0 0 0 0 Penalty 0 0 0 0 Others 0 0 0 0 Total 0.0 0.0 0.0
0 Place : Gujarat Date: 21/07/2020 MITULKUMAR MAHENDRA KUMAR RATHOD Assistant Commissioner
Ghatak 51(Anand)”
4 The plain reading of the aforesaid order would indicate that it is an absurd order. To put it in other words, it is a non speaking order bereft of any material particulars and information. Be that as it may, the firm challenged the order cancelling the registration before the appellate authority. The appellate authority dismissed the appeal vide order dated 17.11.2021 in the following terms: “Order of Appeal filed against Rejection of application for revocation of Cancellation
M/S. Khodiyar Import Export, 0, Jakabhai S Khadki, Borsad Anand, Gujarat 388140 GST No. 24ANXPP3385R1ZR Submitted APL -01 manually with ARN number: AD240521004159j in this office. As per The Gujarat Goods and Service Tax Act Section- 107 (11), hearing took place and appellant was present. After verification, the following details appear. C/SCA/5220/2022 ORDER DATED: 16/03/2022
Appellant's GST number has been cancelled with effect from Dt. 01/12/2019. We have asked for report for cancellation of registration from Assistant Commissioner of State Tax, Unit-2, Anand.
Assistant Commissioner of State Tax, Unit-2, Anand has sent report in letter dated 03/11/2021 with outward no. 1914. In this letter has officer mentioned that they have done spot visit. The residence of the trader is shown as a place of business but no business activity found there. Moreover no physical stock were found. When asked about business activity he said make/sale Farsán but while watching sample sales/purchase bill they have showed sales of BIDI (i.e.cigar) which is not shown in his Registration detail's HSN.
So taking consideration into this negative report, Application for restoration of appeal is Dismissed. Hence, Appeal is Rejected. Deputy Commissioner of State Tax, Appeal -6, Vadodara”
5 In such circumstances referred to above, the firm is here before this Court with the present writ application.
We take notice of the fact that the show cause notice was issued on a specific ground that the firm had not filed returns continuously for a period of six months. The order passed by the respondent No.3 cancelling the registration is also presumed to be on the very same ground though, the order cancelling the registration is a non speaking order. However, we fail to understand how could the appellate authority behind the back of the firm could have taken into consideration the report of the spot visit undertaken by the respondent No.3 for the purpose of dismissing the appeal. Was the firm put to notice that the appellate authority intends to look into the spot visit report prepared by the respondent No.
If the appellate authority would have put the firm to the notice, probably, the firm could have appropriately replied to the same. It appears that behind the back of the firm, the ground which is not at all C/SCA/5220/2022 ORDER DATED: 16/03/2022 in the show cause notice has been considered and ultimately, appeal came to be dismissed.
We are of the view that the entire procedure undertaken not only by the respondent No.3 but even by the appellate authority is in absolute violation of the principles of natural justice. On the aforesaid short ground, we believe that the firm should succeed before us.
In the result, this writ application succeeds and is hereby allowed. The impugned order passed by the Deputy Commissioner of State Tax, Appeal – 6, Vadodara dated 17.11.2021 is hereby quashed and set aside. The original order passed by the respondent No.3 cancelling the registration is also hereby quashed and set aside. We permit the writ applicant to file his returns of an appropriate amount with penalty and interest in accordance with law. The GST registration will have to revived. When we are allowing this writ application, the GST registration stands automatically revived. Within two weeks, if the entire amount towards tax with penalty and interest is not deposited then it shall be open for the respondent No.3 to once again pass an order cancelling the registration.
Direct service is permitted. Rule made absolute.
We leave it open for the concerned authority in future to undertake spot inspection, if need be, in accordance with law. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA
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.