Allahabad High Court Imposes Cost Of Rs. 50000 For Arbitrary Cancellation of GST Registration

The single bench of Justice Pankaj Bhatia observed that the arbitrary exercise of power to cancel the registration in the manner in which it has been done has adversely affected the petitioner. It has also had a negative impact on the revenues that could have flowed into the coffers of GST had the petitioner been allowed to conduct commercial activities. The actions were clearly not in consonance with the ease of doing business, which is being promoted at all levels.

The petitioner is a partnership firm carrying on the business of manufacture and trading of veneer and was granted the registration number under the CGST Act 2017. Prior to the enforcement of the GST, the petitioner was registered under the UPVAT Act and the CST Act also. The assessments were carried out in respect of the petitioner establishment under the VAT Act and the CST Act for the assessment year 2017–18. The petitioner claimed to be carrying out the business from the registered place of business as registered with the GST Authorities and was paying taxes. A show-cause notice was issued to the petitioner under Rule 22(1) of the GST Rules. It was alleged that on the basis of the information which has come to the notice of the Assistant Commissioner, the GST registration is liable to be cancelled. The GST registration was cancelled on the grounds that the taxpayer was found non-functioning/not existing at the principal place of business.

The petitioner, while trying to upload his E-Way Bill, came to know that the registration of the petitioner firm had been cancelled on 08.05.2020. The petitioner moved an application for revocation of the order in terms of the provisions contained in Section 30 of the U.P. GST Act, 2017. The application specifically stated that the facts with regard to cancellation came to the knowledge of the petitioner in the month of June, 2020. In any case, the application was within the time prescribed under Section 30 of the Act. In response to the application filed by the petitioner, a show-cause notice was again issued on 13.06.2020 stating that the application for revocation was liable to be rejected.

In response to the show-cause notice, the petitioner moved an application seeking a 15-day extension of time to give a reply in view of the marriage of the daughter of the petitioner scheduled for June 24, 2020. Without considering the application, an order came to be passed on 15.07.2020 rejecting the application for revocation of cancellation of the registration for the reasons as recorded in the show cause notice that no satisfactory explanation was received within the prescribed time.

The petitioner argued that the show-cause notice was bereft of any facts on the basis of which the petitioner was called upon to file a reply. The show-cause notice was meant to put the assessee on guard and to give a reply in respect of alleged charges against him, whereas the show-cause notice was totally silent with regard to the averments contained or reply to be made against the petitioner.

The department contended that on the date of investigation, no goods were found and, accordingly, the registration was cancelled. It appeared that after the cancellation of the registration, some goods might have been placed by the petitioner at the place.

The court ruled that the authorities who issued the contested order failed miserably to act in accordance with the spirit of the GST Act.

Case Title: Drs Wood Products Lucknow Versus State Of U.P.

Citation: 2022 LiveLaw (AB) 383

Counsel For Petitioner: Advocates Alok Singh, Suyash Agarwal

Counsel For Respondent: C.S.C., Digvijay Nath Dubey

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