2024 (2) TMI 1006 - HC - GST

Cancellation of GST registration of petitioner - Non-maintenance of stock at the registered premises - Authorities fount that petitioner does not conduct any business at the declared place of business and that he does not submit any response to the show cause notice issue to him - drive to curb bogus firms which have been created only to claim the benefit of Input Tax Credit - conditions prescribed under Section 29 (2) of the Act of 2017 are existing in the present case or not - HELD THAT - Considering the provisions contained under Section 29 (2) along with the facts of the present case it is noticed that there is no denial of the fact that the petitioner has, in fact, conducted business from the said address in as much as returns have been filed for the financial years 2021-22 and 2022-23 and this fact has not been denied by any of the authorities. Both the authorities should have taken into consideration the returns filed by the petitioner who had disclosed substantial business activities conducted by him for two financial years. Cancellation of registration has serious consequences. It takes away the fundamental right of a citizen etc. to engage in a lawful business activity. In the present case, undisputedly, the registration claimed by the assessee had been granted by the respondent authority. Therefore, a presumption does exist as to such registration having been granted upon due verification of necessary facts. If the respondents propose to cancel the registration thus granted, a heavy burden lay on the respondent authority to see that statutory provisions contained under Section 29 (2) of the Act of 2017 are fulfilled and any one of the five conditions are placed to the assessee for cancellation. Examining the entire facts of the case this Court is of the considered opinion that the findings returned by the adjudicating authority as well as the appellate authority are perverse in as much as the petitioner submitted that he had filed his returns for the financial years 2021-22 and 2022-23. No further examination of the same was undertaken. Merely because at the place of business no stock was found it was concluded that the petitioner did not conduct any business activity. There is no law which mandates a businessman to always retain stock at the place of business - The authorities have failed to discharge the duties and merely because the place of business did not contain any stock the registration of the petitioner was cancelled. This Court is of the considered opinion that both the impugned orders are illegal and arbitrary and accordingly set aside. The writ petition succeeds and is allowed.

Summary

Issues:
The issues involved in the judgment are the cancellation of registration under U.P. Goods and Services Tax Act, 2017, rejection of the application for revocation, and dismissal of the appeal against both orders.

Cancellation of Registration:
The petitioner's registration was canceled due to the absence of business activity at the declared place of business and failure to respond to the show cause notice. The cancellation was based on the Assistant Commissioner's findings that no business was conducted at the registered premises.

Application for Revocation:
The petitioner applied for revocation of the cancellation and requested a fresh inspection of the business premises. During the inspection, no goods were found, and discrepancies were noted in the landlord's signatures on rent agreements. The application for revocation was rejected citing the absence of goods and discrepancies in signatures.

Appeal Dismissal:
The petitioner appealed the cancellation and revocation rejection, arguing that returns for financial years 2021-22 and 2022-23 demonstrated business activities. However, the appellate authority upheld the cancellation, emphasizing the lack of business activity at the registered premises and discrepancies in landlord signatures, deeming it a sham registration.

Legal Analysis:
The petitioner contended that none of the conditions under Section 29(2) of the Act were met, rendering the cancellation illegal and arbitrary. The petitioner had filed returns showing substantial business activities, which were not refuted. The Court noted that cancellation of registration has serious consequences and should be based on fulfilling statutory provisions, which were not met in this case.

Court's Decision:
The Court found the cancellation orders to be illegal and arbitrary, setting them aside. It emphasized that the authorities failed to consider the filed returns indicating business activities, and mere absence of stock at the business premises was insufficient to cancel registration. The Court allowed the writ petition and directed authorities to issue a fresh notice based on specific grounds under Section 29(2) for any future proceedings.