2024 (8) TMI 67 - HC - GST

Cancellation of the petitioner's registration under the Central Goods and Services Tax Act, 2017 - SCN does not disclose reasons as to why the petitioner no. 1 s registration under the said Act is liable to be cancelled - Violation of prinicples of natural justice - HELD THAT - It cannot be said that the petitioner no. 1 was not disclosed the reasons as to why the show cause had been issued. However mere disclosure of reasons, does not satisfy the requirement of the provisions contained in Rule 25 of the Central Goods and Services Tax Rules, 2017. A perusal of the aforesaid Rule would demonstrate the mode and manner in which the physical verification of the business premises in certain cases are required to be carried out. Admittedly, in this case, the petitioners were not notified of the attempt made by the respondents to identify the petitioner no. 1 s place of business. Although, Mr. Banerjee, by placing reliance on the endorsement made by the postal authorities on a letter dated 17th January, 2024 attempts to establish that the petitioner no. 1 is not in existence, such a procedure to establish the existence or non-existence of a company is unknown in law. Although, the procedure adopted by the respondents to cancel the petitioner no. 1 s registration under the said Act may not be strictly as per the procedure laid down, however, the same cannot be said to be per se illegal or without any basis, especially when the petitioners are not interested to have the factual determination as regards the existence of the petitioner no. 1 s business premises made by the respondents, tested out by a further inspection. The above raises a presumption that the petitioners are withholding information and have not approached this Court with clean hands. The petitioners are not entitled to any relief under Article 226 of the Constitution of India - petition dismissed.

Summary

Issues:
Challenge to show cause notice for cancellation of registration under Central Goods and Services Tax Act, 2017.
Validity of order cancelling registration under the said Act.
Disclosure of reasons for cancellation.
Procedural irregularity in physical verification of business premises.
Petitioners' reluctance to cooperate for further inspection.
Bona fide of petitioners in light of procedural issues.

Analysis:
The judgment pertains to a writ petition challenging a show cause notice and subsequent order for cancellation of registration under the Central Goods and Services Tax Act, 2017. The petitioners argued that the show cause notice did not specify reasons for cancellation, merely stating "others," and contended that the cancellation order was unjustified despite their responses and regular filing of returns with the Ministry of Corporate Affairs. The respondents, however, asserted that the action was based on an investigation indicating the petitioner as a fake entity passing irregular input tax credit (ITC) without actual supply of goods or services. The respondents highlighted the inability to locate the petitioner's business premises during inspection, supporting their decision under Section 29 of the Act.

The court examined the contentions, acknowledging the disclosure of reasons in the show cause notice and the communication of prima facie findings to the petitioners. However, it noted a procedural lapse regarding the physical verification of the business premises, as the petitioners were not informed of the attempts made by the respondents in this regard. Despite the respondents' reliance on postal endorsements to establish non-existence of the petitioner's business, the court found such a procedure legally questionable. The court sought the petitioners' cooperation for a further inspection as per Rule 25 of the Central Goods and Services Tax Rules, but the petitioners' advocate insisted on setting aside the order before permitting inspection.

Considering the petitioners' reluctance to cooperate for a further inspection, the court raised doubts about their bona fides and concluded that the petitioners were not entitled to relief under Article 226 of the Constitution of India. While acknowledging procedural deviations in the cancellation process, the court deemed the action not per se illegal, especially when the petitioners resisted factual verification of their business premises. Consequently, the writ petition was dismissed, with no order as to costs, and parties were directed to comply with necessary formalities for obtaining a certified copy of the order.