2021 (8) TMI 408 - HC - GST

Cancellation of certificate of registration under the CGST/SGST Act - invocation of Sub Section (2) of Section 29 of the CGST Act, 2017 - HELD THAT - The proper officer can cancel registration of a person for the reasons stated in Sub Section (2) of Section 29 of the CGST Act. It is not the case of the respondents that the petitioner had contravened any of the provisions of the Act or Rules made thereunder, inasmuch as, no such allegation is levelled against the petitioner either in the show case notice (Ext.P5) nor such accusation is made against him in the impugned order at Ext.P8. My attention is not drawn to contravention of any provision of the Act or Rules framed thereunder by the learned Government Pleader. Similarly, there are no allegations either in the show cause notice or in the impugned order that the petitioner has failed to furnish returns for three consecutive tax periods or that he failed to file returns for a continuous period of six months. It is thus clear that in consonance with the allegation levelled in the show cause notice, the impugned order is passed for the reason that the business place is situated in a building which is partially completed with structures only and no building number is affixed by the local authority. Even otherwise, the respondent department cannot go beyond the show cause notice issued by it to the petitioner, requiring the petitioner to defend the case against him as conveyed to him in the show cause notice. Thus, this Court will have to examine whether the reasons stated in the show cause notice, which is reproduced in the foregoing paragraph, can be construed as reason for cancellation of registration as per provisions of Sub Section (2) of Section 29 of the CGST Act, 2017. The answer to this question is found to be in negative, because Sub section (2) of Section 29 does not envisage the contingency of situation of place of business in a partially completed building having no building number affixed on it by the local authority. In the case in hand, the State Tax Officer, Pala is the proper officer for assessment and he is a competent officer to invoke provisions of Rule 25. The State Tax Officer, Pala is also the registering authority of the petitioner. This officer has issued a notice to cancel the registration of the petitioner in FORM GST REG 17, based on the report of the intelligence officer. It is clear that the State Tax Officer, Pala has himself did not conduct any enquiry as contemplated in Rule 25 - The proper officer ought to have independently assessed the situation, particularly, when the petitioner had produced the receipt of the building tax from the local authority (Ext.P3) to prove the authenticity of his stand. This seems to have been not done by the proper officer. Without considering this document at Ext.P3, the registering authority had cancelled the registration. The application for revocation of cancellation of registration is also rejected by the respondent without proper enquiry in the matter. The respondents are directed to restore the registration of the petitioner - Petition allowed.

Summary

Issues:
Challenge to cancellation of registration certificate under CGST/SGST Act and rejection of application for revocation of cancellation.

Analysis:
The petitioner challenged the cancellation of registration certificate and rejection of the application for revocation. The petitioner argued that the reasons for cancellation were not in line with the powers conferred for cancellation. The petitioner contended that all necessary particulars were provided during registration and no fraud or willful misstatement was involved. The petitioner relied on a previous court judgment to support the argument that minor lapses in registration matters should not be overemphasized.

The Government Pleader opposed the petition, citing multiple inspections revealing discrepancies at the petitioner's business premises. It was found that no business activity was conducted at the principal place of business, and stock was kept at an unregistered location, raising suspicions of bogus operations. The business was not found to be functioning at the registered address, leading to the cancellation of registration.

Upon considering the submissions and evidence, the court analyzed the relevant provisions of the CGST Act regarding cancellation of registration. It was noted that the reasons provided for cancellation did not align with the statutory grounds for cancellation as per Section 29 of the CGST Act. The court highlighted discrepancies between the show cause notice and the actual reasons for cancellation, emphasizing that the cancellation should be based on valid grounds as per the law.

The court also referred to Rule 25 of the CGST/SGST Rules, which outlines the procedure for physical verification of business premises. It was observed that the proper officer did not conduct a proper enquiry as required by the rule before canceling the registration. The court found that the cancellation was not justified, especially when the petitioner had provided evidence to support their case.

Ultimately, the court allowed the writ petition, quashed the orders of cancellation and rejection, and directed the authorities to restore the petitioner's registration. The judgment emphasized the importance of following legal procedures and ensuring that cancellations are based on valid and substantiated reasons in accordance with the law.