M/S Empire Steel Holdings Through Proprietor Mrs. Akriti Mishra vs. Union Of INDIA

Held

The High Court quashed the impugned orders dated 29.05.2023 (Superintendent Officer), 03.08.2023 (Deputy Commissioner), and 25.04.2024 (Joint Commissioner). The Court found that the entire impugned action of the respondents was based on the presumption that the firm was bogus solely because the office/place of business was found locked. The Joint Commissioner's findings indicated that while the business was non-operational at the registered principal place, the proprietor, Smt. Akriti Mishra, was in existence and had provided a valid explanation. Crucially, no investigation was conducted to verify the genuineness of the transactions before issuing the show-cause notice. The examination of GSTR-2A revealed that the suppliers of the noticee were in existence and active, reflecting the genuineness of the purchases. The Court held that the cancellation of registration and subsequent orders were unsustainable. The registration license of the petitioner was restored from its date of issuance. The Court allowed the writ petition with costs of Rs. 10,000/-.

Facts

The petitioner, M/s Empire Steel Holdings, a proprietorship firm registered under GST, faced cancellation of its registration effective from 04.10.2017. This action stemmed from a physical verification on 15.05.2023 at its registered address (Orbit Mall, Indore), which was found locked. A show-cause notice was issued, and the registration was cancelled on 29.05.2023. The petitioner's application for revocation was rejected on 03.08.2023, citing non-genuineness. Subsequently, an appeal was filed, and a show-cause notice for penalty imposition was issued on 25.07.2024. The petitioner challenged these orders and notices through a writ petition before the High Court. The respondents contended that the business premises were non-existent/non-operational, leading to the presumption of wrongly availed Input Tax Credit (ITC).

Key Issues

1. Whether the cancellation of GST registration was arbitrary and unjustified, particularly concerning the grounds for cancellation under Section 29 of the CGST Act, 2017, and whether the physical verification was conducted behind the petitioner's back in violation of rules? 2. Whether the respondents failed to consider the documents submitted by the petitioner for revocation, including GSTRs, business transactions, and tax paid? 3. Whether the petitioner availed Input Tax Credit without undertaking any business, or if the business operations shifted to a residential address due to unavoidable circumstances, and if the premises were found locked due to this shift? Petitioner's Arguments: The cancellation of GST registration was arbitrary and unjustified. The physical verification was conducted behind the petitioner's back, violating rules. Section 29 of the CGST Act, 2017, does not provide for cancellation on the grounds cited. The petitioner shifted business operations to her residential address due to health issues and inability to bear rent, and this shift was not verified. Documents submitted for revocation were not considered. The petitioner paid input tax credit in cash and did not avail ITC without business. Reliance was placed on Roxy Enterprises v/s Union of India (Delhi High Court) and M/s Shyam Sundar Sita Ram Traders v/s State of U.P. (Allahabad High Court). Respondents' Arguments: The petition was rendered infructuous as a subsequent order on 31.12.2024 dropped a penalty of Rs. 6,17,33,624/-. The business premises were found locked and non-operative. The owner of an amended address denied knowledge of the firm. Examination of GSTR-2A revealed ITC of Rs. 2,95,49,215/- was availed. Since the business place was non-existent/non-operational, it is presumed the petitioner wrongly availed and utilized GST via fake returns. Therefore, the petition should be dismissed.