GST Act | Registration Can Only Be Cancelled U/S 29 Read With Rule 21, No Aid Can Be Taken From Any Other Statute: Allahabad HC Reiterates

The Allahabad High Court has reiterated that GST registration can only be cancelled under Section 29 of the Goods and Service Tax Act, 2017 read with Rule 21 of the GST Rules, 2017. For the purpose of cancellation of GST registration, no aid can be taken from any other statute.

The bench comprising of Justice Piyush Agrawal, referring to the decision of Supreme Court Union of India and others Vs. Ind- swift Laboratories Limited, observed

“The Hon'ble Apex Court in the case of Ind-Swift Laboratories Limited (supra) has categorically held that a taxing statute must be interpreted in the light of what is clearly expressed therein meaning thereby when Section 29 read with rule 21 specifically provides a complete mechanism statute under which the registration can be cancelled and no aid can be taken by any other statute.”

The Court held that any direction for cancellation of registration by the Taj Trapezium Zone Pollution (Prevention and Control) Authority (TTZ Authority) constituted under the Environment (Protection) Act, 1986 will remain subject to Section 29 of the GST Act read with Rule 21 of the GST Rules, 2017.

Factual Background:

Petitioner firm is a registered business for purchase and sale of coal on retail basis. Business turnover being above Rs. 50 lakhs, petitioner opted for compounding scheme under Section 9(1) of UPGST Act. A show cause notice was issued to the petitioner proposing cancellation of its GST registration along with the direction of TTZ authority and written direction by JC (SIB)-B Agra for cancellation of registration of all coal depot. Being dissatisfied with the reply of the petitioner, registration of the petitioner was cancelled with retrospective effect. Appeal preferred by the petitioner against cancellation was also dismissed.

Counsel for petitioner submitted that GST Act is a complete Code in itself and for cancellation of registration, requirements mentioned in Section 29 of the UPGST Act read with Rule 21 of the Rules framed therein should be fulfilled. Since petitioner did not violated any provision of GST Act, impugned cancellation was bad in law. Copies of direction issued by JC (SIB)-B, Agra as well as the direction of TTZ authority for cancellation of petitioner’s registration was never served upon the petitioner. Further, it was argued that the order of cancellation was a non-speaking order and without application of mind.

Relying on the decision of Allahabad High Court in M/S Videocon D2h Ltd. Vs. State of U.P. and 3 Ors., counsel for petitioner submitted that firstly, on the date fixed for submitting the reply, order was not passed, hence, the impugned order cannot sustain. Secondly, if the petitioner did not appear on the next date, the order ought not to have passed ex-parte.

Further, it was contended that Section 5 of the Act of 1986 applies only to industry or any person involved in such operation. However, petitioner was only a coal dealer carrying on business of purchasing and selling, which does not pollute the environment. Therefore, it will not be covered by the said direction. Lastly, jurisdiction of TTZ Authority was challenged as having being expired. Accordingly, no order could have been passed by it.

Per Contra, counsel for respondents submitted that petitioner did not adhere to the directions issued from time to time under the Act of 1986 as well as TTZ Authorities. It was alleged that petitioner had failed to maintain sale register of coal in detail as well as failed acquire no objection certificate from the Pollution Control Board and other authorities. Petitioner failed to maintain the sale register which was violative of the GST Act and failure to maintain coal register was violation of the mandate of TTZ Authorities, it was alleged to defend the cancellation order.

High Court Verdict:

The Taj Trapezium Zone Pollution (Prevention and Control) Authority (TTZ Authority) was constituted by Ministry of Environment and Forest, Government of India in exercise of power conferred by sub-clause 1 & 3 of Section 3 of Environment (Protection) Act, 1986. The Court noted that under Section 5 of the Act of 1986 any authority or officer under the Act shall be bound by the directions issued by the Central Government regarding industry only.

The Court further held that Section 24 of the Act of 1986 clearly provides that if any offence is punishable under the Act of 1986 as also any other enactment, offender shall be liable to be punished under other act and not under Act of 1986.

“In other word, if any other enactment is in operation, then environment act has overriding effect, but for punishing and such punishment will be under that Act. Any direction given by the TTZ Authorities for cancellation of registration has to be in accordance with Section 29 read with rule 21 of GST Act and Rules therein. The GST authorities cannot blindly follow said direction of TTZ Authorities,” observed the Court.

Reliance was placed on the decision of the Supreme Court in Union of India and others Vs. Ind- swift Laboratories Limited to hold that provisions of taxing statute must be interpreted literally. The Court held that for cancelling the GST registration reliance can only be placed on Section 29 of the GST Act read with Rule 21 of the GST Rules and no aid can be taken from any other statute.

Further, the Court placed reliance on Agra Coal Suppliers Vs. State of U.P., Thru' Principal Secry., Instt. Finance & Anr., wherein the Allahabad High Court had held that in view of the judgment of the Supreme Court in M.C. Mehtra (Taj Trapaziam Matters) Vs. Union of India & Another (1997) registration of coal dealers cannot be cancelled as the judgment refers only to “industries operating within Taj Corridor and the pollution resulting therefrom including the air pollutant is affecting the quality of life including Taj Mahal.”

On the action taken by the tax authorities against coal dealers, the Court observed that “the taxing authorities (GST) in the State of U.P on the zeal to pleasing the TTZ authorities have issued two letters dated 18.8.2022 and 19.09.202, copy of which have been annexed and Annexure Nos. 17 & 18 directing for cancel the registration of all coal dealer of Agra, which was neither intend nor the direction by the TTZ authorities.”

The Court placed reliance on the Apex Court decision in Mohinder Singh Gill Vs. The Chief Election Commissioner, New Delhi to disregard the appendix order which was filed along with the cancellation order for the first time before the High Court. The Apex Court had held that “State authority cannot be permitted to supplement fresh reasons by means of affidavit.” Accordingly, since the counsel for respondent could not confirm if the appendix order was brought on record at the appellate stage, the Court held that such order cannot be of any ‘aid’ to the authorities.

Lastly, the Court observed that there was no finding in the cancellation order regarding books not being maintained by the petitioner. Accordingly, the order for cancellation of GST registration of the petitioner was quashed. Authorities were directed to reinstate the petitioner's registration certificate immediately with retrospective effect along with all consequential benefits.

Case Title: M/S Vidya Coal Depot v. Additional Commissioner Grade (Appeal) II And Another [WRIT TAX No. - 394 of 2023]

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