Anil Kishore Purohit vs. The State Of Madhya Pradesh

Held

The Court held that the entire action of the respondents, including the show-cause notice, cancellation of registration, and dismissal of the appeal, was unsustainable and liable to be set aside. The Court found that the Field Visit Report, which formed the basis of the cancellation, was prepared by a single officer without any independent witnesses or the signature of the petitioner's son, who was present. This procedural flaw, similar to a case decided by a Division Bench of the same Court, rendered the report invalid. The Court also noted a contradiction: the cancellation of registration was based on the finding that no business activity was found, yet the subsequent assessment orders for three financial years alleged tax liabilities arising from business activities. The Court stated that these two allegations could not coexist. The Court also observed that the respondents did not disclose the status of the petitioner's application for revocation of cancellation of registration. Consequently, the registration license of the petitioner was restored. The Court directed the petitioner to prefer appeals against the assessment orders dated 11.06.2025 before the Appellate Authority, as these orders were appealable and not challenged by way of amendment in the present petition.

Facts

The petitioner, Anil Kishore Purohit, proprietor of M/s Aditya Electricals, challenges the cancellation of his GST registration. The Assistant Commissioner of State Tax issued a show-cause notice for cancellation under Section 29(2)(e) of the CGST Act, alleging fraud, wilful misstatement, or suppression of facts. The petitioner claims the notice was uploaded to the GST portal but not physically served, preventing him from replying. Consequently, his registration was cancelled on 22.09.2023. An application for revocation was filed, but no order was passed. Subsequently, show-cause notices for demand and interest for financial years 2019-20, 2021-22, and 2022-23 were issued. An appeal against the cancellation order was dismissed on grounds of limitation, as the petitioner allegedly did not appear before the appellate authority. During the pendency of the writ petition, assessment orders for the said financial years were passed.

Key Issues

1. Whether the cancellation of the petitioner's GST registration was valid, considering the alleged non-service of the show-cause notice and the procedural irregularities in the field visit report, contrary to Section 29(2)(e) of the CGST Act, 2017? 2. Whether the subsequent assessment orders for financial years 2019-20, 2021-22, and 2022-23 are sustainable when they are based on the premise of business activity, contradicting the grounds for cancellation of registration which alleged no business activity? Petitioner's Arguments: The petitioner argued that the show-cause notice for cancellation was not properly served, depriving him of an opportunity to respond. He also contended that the field visit report, forming the basis for cancellation, was prepared by a single officer without independent witnesses or the signature of his son present at the premises, rendering it invalid, citing a precedent from this Court. Furthermore, he argued that the assessment orders, which allege tax liabilities due to business activity, are contradictory to the cancellation order based on no business activity. Revenue's Arguments: The State submitted that the petitioner's registration was selected for physical verification during an "All India Drive - Phase III." A field visit report indicated no business was functioning and no stock was available. The petitioner's son was present, implying knowledge of the action. The State argued that the registration was obtained or continued by fraud, wilful misstatement, or suppression of facts, and the cancellation was effective retrospectively. They also stated that assessment orders have been passed, and statutory appeals lie against them.