2021 (11) TMI 241 - HC - GST

Principles of natural justice - Cancellation of registration of the petitioner - Section 29 of the U.P. GST Act, 2017 - contention of petitioner is that the SCN reveals no details as to whether any survey had actually taken place or not and that what was the date and time fixed for personal hearing - HELD THAT - Rule 21 of the U.P. GST Rules, 2017 provides that the registration granted to a person is liable to be cancelled, if the said person; (a) does not conduct any business from the declared place of business; or (b) issues invoice or bill without supply of goods or services in violation of the provisions of the Act, or the rules made thereunder; or (c) violates the provisions of section 171 of the Act or the rules made thereunder. A bare perusal of the show cause notice format prescribed under Rule 22(1) shows that there is a difference in the show cause notice dated 12.5.2021 issued to the petitioner and in the form of the show cause notice quoted aforesaid. The specific date and time is necessarily required to be mentioned in the notice for showing cause which is conspicuous by its absence in the notice to the petitioner. Moreover, the proviso to subsection (2) of Section 29 mandates opportunity of hearing being provided to the person whose registration is proposed to be cancelled before cancelling the registration - the denial of opportunity of hearing to the petitioner as is mandated in the first proviso to sub-section (2) of Section 29 of the Act of 2017 vitiates the proceedings as well as the orders cancelling the registration of the petitioner. The provisions of sub-section (1) of Section 29 would come into play where (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or (b) there is any change in the constitution of the business; or (c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24. The learned Standing Counsel has not been able to demonstrate that the case of the petitioner is liable to be covered under any of the three clauses as aforesaid - Sub- Section (1) of Section 29 would come into play only in the given set of circumstances that are mentioned in sub-section (1) and for no other reasons. The order of cancellation of registration dated 28.5.2021 as well as order passed in the appeal dated 17.7.2021 are quashed - Petition allowed.

Summary

Issues:
Challenge to order cancelling registration under U.P. GST Act, 2017.

Detailed Analysis:
The petitioner, a proprietorship concern dealing in Iron and Steel Goods, challenged the cancellation of its registration under the U.P. GST Act, 2017. The cancellation was based on findings that the business was non-functioning, no business activity was found at the premises, and purchases were made from non-existing dealers with bogus input tax credit. The petitioner contended that the show cause notice lacked details of a survey, date, and time for a personal hearing, violating principles of natural justice. The petitioner argued that the cancellation order without a hearing was null and void, as per Section 29 of the Act.

The Standing Counsel defended the cancellation, stating that proceedings under Section 29(1) do not require a hearing, as the show cause notice provides seven days for a reply. However, the Court found merit in the petitioner's argument. The show cause notice lacked essential details, contrary to the prescribed format under Rule 22(1) of the U.P. GST Rules, 2017. The Court noted that the petitioner was not given a hearing opportunity as mandated by law before cancellation.

The Court highlighted the importance of following statutory procedures, emphasizing that denial of a hearing as required by Section 29(2) of the Act invalidates the cancellation proceedings. The Standing Counsel's reference to Section 29(1) was deemed irrelevant, as it applies to specific scenarios not applicable to the petitioner's case. Consequently, the Court quashed both the registration cancellation order and the appeal decision, ruling in favor of the petitioner.

In conclusion, the Court allowed the petition, setting aside the orders cancelling the petitioner's registration under the U.P. GST Act, 2017. The judgment underscores the significance of providing a fair hearing opportunity before taking such drastic actions, ensuring compliance with procedural requirements and upholding principles of natural justice.