2024 (12) TMI 576 - HC - GST

Cancellation of GST registration of petitioner obtained by means of fraud willful misstatement or suppression of facts from a retrospective date - HELD THAT - The original SCN had proceeded on the allegation that the registration had been obtained by means of fraud and was thus liable to be cancelled. However that notice failed to advert to or found itself upon any cogent material on the basis of which the respondents came to form the opinion that the registration itself had been obtained by practice of fraud or by the making of a willful misstatement or suppression of facts. More importantly the Court notes that the said SCN had failed to allude to the amended registration certificate which had come to be obtained by the petitioner in the meanwhile and had been issued on 02 July 2019. That development has clearly not been borne in consideration. There is an occasion to note in the preceding parts of this order that it was these very premises which had also been searched by the authorities working under the DGGI. The respondents in terms of a notice of 20 January 2023 however allude to an inspection report submitted by the Deputy Commissioner Anti-Evasion dated 03 June 2022. It is the conceded case that a copy of the said communication was neither provided to the writ petitioner nor was it ever confronted with the same. It is this material which appears to have formed the basis for the passing of the order of 20 February 2024 rejecting the application for revocation. It is found that although it was alleged that the registration was liable to be cancelled on the ground of fraud willful misstatement or suppression of facts none of the authorities including the appellate authority have rested their opinion on any material which may have even remotely indicated that the registration certificate when originally obtained was the outcome of the practice of fraud willful misstatement or suppression of facts. The impugned orders dated 29 December 2022 20 February 2024 as well as the order of the appellate authority dated 08 July 2024 are hereby quashed - petition allowed.

Issues Involved:

1. Validity of GST registration cancellation.
2. Allegations of fraud, willful misstatement, or suppression of facts.
3. Retrospective cancellation of GST registration.
4. Procedural fairness in issuing Show Cause Notices and orders.
5. Adequacy of evidence and reasoning in the cancellation process.

Detailed Analysis:

1. Validity of GST Registration Cancellation:

The petitioner challenged the cancellation of their GST registration, which was initially registered under the Delhi Value Added Tax Act and later migrated to the Central Goods and Services Tax Act, 2017. The registration was canceled by the authorities on the grounds that it was obtained through "fraud, willful misstatement or suppression of facts." The petitioner contested the cancellation, arguing that the authorities did not provide any cogent material to support these allegations. The court found that the authorities failed to consider the amended registration certificate issued on 02 July 2019 and did not provide any evidence indicating fraud or misstatement at the time of the original registration.

2. Allegations of Fraud, Willful Misstatement, or Suppression of Facts:

The authorities issued a Show Cause Notice (SCN) alleging that the registration was obtained fraudulently. However, the court noted that the SCN did not cite any specific evidence to substantiate these claims. The appellate authority also failed to address this lack of evidence, and the court emphasized that none of the authorities provided material evidence to support the allegations of fraud or misstatement.

3. Retrospective Cancellation of GST Registration:

The court addressed the issue of retrospective cancellation, which was made effective from 03 July 2017. The court referred to its previous decisions, highlighting that while the law permits retrospective cancellation, such power must be exercised with due consideration and reasoning. The court criticized the authorities for not providing a reasoned order justifying the retroactive effect, emphasizing that such cancellations should not be routine or mechanical.

4. Procedural Fairness in Issuing Show Cause Notices and Orders:

The court found procedural lapses in the issuance of the SCN and subsequent orders. It noted that the petitioner was not provided with the inspection report or any material that formed the basis of the cancellation decision. The court stressed the importance of procedural fairness, stating that the authorities failed to provide the petitioner with an opportunity to respond to the allegations adequately.

5. Adequacy of Evidence and Reasoning in the Cancellation Process:

The court criticized the lack of evidence and reasoning in the cancellation process. It highlighted that the authorities did not produce any documentary evidence to support the allegations against the petitioner. The appellate authority's decision was also found lacking, as it did not address the petitioner's arguments or the absence of evidence. The court concluded that the cancellation orders were unsustainable due to the absence of material evidence and reasoning.

Conclusion:

The court quashed the impugned orders dated 29 December 2022, 20 February 2024, and the appellate authority's order dated 08 July 2024. The writ petition was allowed, with the court emphasizing that the authorities failed to provide adequate evidence or reasoning for the cancellation. However, the order was made without prejudice to the respondents' rights to initiate fresh proceedings in accordance with the law.

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