2023 (2) TMI 976 - HC - GST

Cancellation of registration of petitioner - taxpayer found non-functioning/not existing at the principal place of business - HELD THAT - This Court is unable to accept that the impugned show-cause notice can be sustained, considering that it is clear that it is premised on an alleged inspection that was carried contrary to the 2017 Rules. This court had also enquired whether any photographs were taken at the time of the inspection as required; Mr Satyakam has, after obtaining instructions, responded in the negative. The petition is allowed and the impugned show-cause notice as well as the impugned order is set aside.

Summary

Issues involved:
Impugning the cancellation of registration under the Goods and Services Tax Act (GST Act) and suspension of registration based on alleged inspection.

Analysis:

Cancellation of Registration:
The petitioner challenged the cancellation of their GST registration, which was done through an order dated 02.11.2022 by the respondent, with effect from 09.09.2022. The petitioner was registered under the GST Act on 09.09.2022, and a Registration Certificate was issued. The cancellation was based on the grounds that the taxpayer was found non-functioning or not existing at the principal place of business. The impugned show-cause notice called upon the petitioner to justify why its registration should not be canceled. However, the cancellation order was issued without raising any demand. The petitioner argued that the cancellation was in violation of Rule 25 of the Central Goods and Services Rules, 2017, as they were not given an opportunity to be present during the alleged inspection, and no photographs were uploaded as required by the rule.

Alleged Inspection and Suspension:
The impugned show-cause notice and subsequent cancellation were triggered by an alleged inspection conducted on the petitioner's premises on 27.09.2022. The respondent claimed that there was no establishment at the address and the petitioner was not functional. The field visit report was prepared but not uploaded, and no photographs were taken during the inspection. The petitioner contended that the inspection was conducted contrary to the 2017 Rules, as they were not given an opportunity to be present during the inspection, and no photographs were uploaded as required. The respondent, while admitting the lapse in not affording the petitioner an opportunity of hearing before canceling the registration, argued that the show-cause notice was valid and provided the petitioner with a chance to contest the cancellation.

Court Decision:
The Court held that the impugned show-cause notice could not be sustained as it was based on an inspection that did not comply with the 2017 Rules. The Court also noted that no photographs were taken during the inspection as required. Consequently, the petition was allowed, and both the show-cause notice and the cancellation order were set aside. The respondent was given liberty to conduct further inquiries in accordance with the law. If the respondent believed that the petitioner was not carrying on any business, they were directed to issue a fresh show-cause notice with reasons and proceed lawfully. The Court clarified that its decision did not express an opinion on whether the petitioner was conducting business at the time. All rights and contentions of the parties were reserved, and the petition was disposed of accordingly.