2022 (7) TMI 760 - HC - GST

Cancellation of petitioner's registration - Section 29(2) (a) of U.P. Goods and Services Tax Act 2017 - HELD THAT - In the present case, the show cause notice was issued, ostensibly with reference to Section 29(2)(a) of the Act, inasmuch as, the notice dated 9.7.2021 alleged non-compliance of specified provisions of GST Act or the Rules. However, that notice did not disclose the exact violation of the Act or the Rules, alleged. Unless that allegation was specified in the notice with details and unless material considered adverse to the petitioner had been confronted to it for the purposes of eliciting its reply thereto, the notice dated 9.7.2012 would remain completely vague and mute. A person who may be visited with the notice proposing such a harsh civil consequence had a perfect right to be informed of the exact allegations levelled against him. In a way, the harshest penalty contemplated is cancellation or registration of the assessee. The cancellation of the registration has the consequence of bringing the business of an assessee to a complete stand still. Its a death of his business. It has adverse impact on his fundamental right to do business. The petitioner was not confronted either with the substance of the allegation of violation of the provisions of the Act and the Rules framed thereunder and it is not shown that alleged violations were such, as may have warranted cancellation of the petitioner s registration under Section 29(2)(a) of the Act. Also, since the material if any that may have founded the basis for such allegation had not been confronted to the petitioner, the entire exercise would remain an irregular exercise. In fact, the proceedings had been initiated, continued and concluded without jurisdictional facts shown to exist. Since the cancellation notice did not refer to the notice dated 8.6.2021, reference made to it in the appeal order is irrelevant and uncalled. Even then, it does not make out allegation of violation of Section 29(2)(a) of the Act. Let the registration of the petitioner be restored forthwith - Petition allowed.

Summary

Issues:
- Validity of cancellation of registration under Section 29(2)(a) of U.P. Goods and Services Tax Act 2017.

Analysis:
1. The petitioner challenged the order cancelling their registration under Section 29(2)(a) of the Act. The appeal authority confirmed the cancellation based on alleged infractions under other laws. However, the High Court found the orders unsustainable in law as the cancellation notice did not specify the exact violations of the Act or Rules, depriving the petitioner of the opportunity to respond adequately.

2. The cancellation of registration has serious civil consequences, and Section 29(2) provides for harsh penalties including retrospective cancellation. The Court emphasized that cancellation cannot be arbitrary and must be based on specific grounds such as contravention of Act provisions, non-filing of returns, or fraudulent registration. In this case, the notice lacked specific details of the alleged violations, rendering the cancellation invalid.

3. The Court highlighted that a person facing registration cancellation must be informed of the allegations to defend their case effectively. The cancellation severely impacts the fundamental right to conduct business, making it crucial for authorities to provide clear and detailed reasons for such drastic actions. Without proper disclosure of allegations and supporting evidence, the cancellation becomes arbitrary and unjust.

4. The High Court concluded that the cancellation orders were quashed due to procedural irregularities and lack of jurisdictional facts. The petitioner's registration was ordered to be restored immediately, with a provision for revenue authorities to initiate fresh proceedings based on substantial and clear evidence if necessary, emphasizing the importance of due process and fair treatment in tax matters.