2023 (1) TMI 1339 - HC - GST

Cancellation of GST registration of the petitioner - obtaining such registration by fraud, wilful misstatement or suppression of facts - HELD THAT - Section 29(2)(e) of the CGST Act undoubtedly enables the proper officer to cancel the registration even with retrospective effect. However, it should be borne in mind that such cancellation may be effected under clause (e) only based on material supporting an inference that the registration was obtained by means of fraud, wilful misstatement or suppression of facts. In this case, the registration was obtained in the year 2019 and no material has been placed on record to support the inference that the registration was obtained in early 2019 by means of fraud, wilful misstatement or suppression of facts. Therefore, the impugned order calls for interference. The impugned order is quashed and the matter is remanded to the first respondent. Consequently, the respondents are directed to restore the registration subject to the outcome of re-adjudication. Petition disposed off by way of remand.

Summary

Issues:
Challenge to cancellation of GST registration under Section 29(2)(e) of the CGST Act without proper justification and reasons provided in the show cause notice.

Analysis:
The petitioner, a partnership firm engaged in steel and metal trading, challenged the cancellation of its GST registration, contending that the registration was obtained without fraud, wilful misstatement, or suppression of facts. The petitioner explained that the business closure was due to financial crisis and inability to pay rent, leading to surrendering the lease and obtaining a new one. The show cause notice lacked specific reasons for the cancellation, merely citing Section 29(2)(e) of the CGST Act. The petitioner's response was not considered, and the registration was cancelled retrospectively without adequate justification.

Analysis:
The respondents argued that the cancellation was justified under Section 29(2)(e) of the CGST Act as the registered unit was not found at the provided address during physical verification. However, the lack of material supporting fraud, wilful misstatement, or suppression of facts at the time of registration in 2019 rendered the cancellation order inappropriate. The court noted that while the Act allows retrospective cancellation, it necessitates concrete evidence of fraudulent practices, which was absent in this case.

Analysis:
The court held that the cancellation order lacked sufficient grounds and quashed it, remanding the matter for re-adjudication. The respondents were directed to restore the registration pending re-evaluation. The first respondent was instructed to issue a fresh show cause notice, granting the petitioner a fair opportunity to respond before issuing any new orders. The judgment clarified that the restoration of registration did not impede actions for non-filing of returns or tax recovery proceedings.

Analysis:
The writ petition was disposed of without costs, and the connected miscellaneous petitions were closed, emphasizing the need for proper justification and adherence to due process in cancellation of GST registrations under Section 29(2)(e) of the CGST Act.