PHYHSICAL VERIFICATION OF BUSINESS PREMISES

[Mr. M. GOVINDARAJAN]

Chapter III of Goods and Services Tax Rules, 2017 provides the procedure for getting registration from the GST Department by the taxable person. 

Rule 25 provides that where the proper officer is satisfied that the physical verification of the place of business of a person is required due to failure of Aadhaar authentication or due to not opting for Aadhaar authentication before the grant of registration, or due to any other reason after the grant of registration, he may get such verification of the place of business, in the presence of the said person, done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days following the date of such verification.

Rule 25 mandatorily requires that at the time of physical verification of the premises by the Departmental officers shall be carried out in the presence of taxable person and also verification report is to be prepared and uploaded I Form GST REG – 30.  Recently some registrations have been cancelled due to the premises registered for the purposes of GST has not performed any business and so the Department cancelled the registration without following the principles of Natural Justice.  In such cases the Courts directed the Department to restore the cancellation of registration.

In CURIL TRADEX PVT. LTD. VERSUS THE COMMISSIONER, DELHI GOODS AND SERVICE TAX & ANR. - 2022 (9) TMI 259 - DELHI HIGH COURT a show cause notice dated 12.04.2022 was issued by the respondents in response to a letter dated 06.04.2022 received from the Deputy Commissioner (DC), CGST–Delhi South Commissionerate.  The revenue suspended the registration of the petitioner with effect from the date of the issuance of the show cause notice.  Against this the petitioner filed the present writ petition before the High Court.  The petitioner submitted the following before the High Court-

• the impugned order cannot be sustained in law, for the reason that, now, the respondents/revenue appear to have accepted the position that the letter dated 06.04.2022 issued by the DC which was the foundation for the issuance of the show cause notice dated 12.04.2022 and the resultant impugned order, was not furnished to the petitioner.
• if the proper officer opted for physical verification of the petitioner’s business premises, it could only be carried out in the presence of its authorized representative. 
•  no notice of inspection was served on the petitioner.

The Revenue contended that even if the communication dated 06.04.2022 was furnished to the petitioner, the result would be the same, and therefore, the grievance articulated on behalf of the petitioner that principles of natural justice were not adhered to cannot help the cause of the petitioner.  The revenue attached photographs to reveal that there is no business activity in the premises of the petitioner.

The High Court observed that neither was the letter dated 06.04.2022 furnished to the petitioner, nor was the petitioner given any notice of inspection.  The physical verification was carried out by the respondents/revenue, albeit, without having the petitioner’s authorized representative remain present.  The High Court further observed that the photographs reveal that the business premises exist. Furthermore, the photographs do reveal that the premises were evidently empty.   Further the impugned order would show that no tax or cess is due from the petitioner.

The High Court issued the following directions-

• The petitioner will file an application for revocation of order of cancellation within the next 15 days.
•  Once an application is filed, the same will be adjudicated by the concerned officer within two weeks of the date of submission of the application.
• A speaking order will be passed by the concerned officer; a copy of which will be furnished to the petitioner.
• In case the order passed by the concerned officer is adverse to the interests of the petitioner, the petitioner shall have liberty to take recourse to an appropriate remedy, albeit, as per law.

In BIMAL KOTHARI VERSUS ASSISTANT COMMISSIONER (DSGST) & ORS. - 2022 (11) TMI 428 - DELHI HIGH COURT, a show cause notice was issued to the petitioner on 04.12.2018 with the direction to the petitioner to appear before the concerned authority on or before 12.12.2018 at 11.03 am.  The petitioner filed a reply to the show cause notice in response to the show cause notice, dated 07.12.2018.  In the reply the petitioner submitted that the petitioner relocated a new place as the principal place of business.  The GST registration has been cancelled by the respondents on the ground that the petitioner was not found to be in existence at the address available with respondent no.1.  The present writ petition has been filed against the cancellation order of GST registration passed on 17.12.2018 by the first respondent. 

The petitioner submitted the following before the High Court-

• During June 2018 an application had been filed by the petitioner with the concerned authority indicating the fact that the petitioner had relocated its principal place of business.
• In the reply to the show cause notice also the petitioner indicated about the shifting of the principal place of business to the new location.

The respondents submitted that insofar as the application for amendment is concerned, since a reference number was not generated it could not have been considered.  Since it was not uploaded on the designated portal, it could not have been considered by the concerned authority.

The High Court asked the respondent whether the physical verification of the petitioner has been done by the respondent.   The High Court analyzed the provisions of GST rules relating to physical verification of the premises of the taxable person before giving registration.  It cannot be disputed that Rule 25 provides for a statutory regime in cases where the proper officer is satisfied that physical verification of the assessee’s business premises is required to be carried out. The respondents also agreed to this.

Rule 25 rule provides that where a proper officer is satisfied that physical verification of the place of business of a person is required due to failure of Aadhaar authentication, before the grant of registration or due to any other reason after the grant of registration, such physical verification of the place of business, if deemed necessary, is to be carried out in the presence of the said person. After physical verification is carried out, a report generated in that behalf along with other documents, including photographs, is required to be uploaded in FORM GST REG-30 on the common portal within 15 days following the date of such verification.

The High Court observed that  in the instant case, the concerned officer deemed it necessary to carry out physical verification of the petitioner’s place of business before proceeding to pass the impugned order, which resulted in, as noticed above, in the cancellation of the petitioner’s registration. No notice was issued to the petitioner requiring, as mandated by Rule 25, his presence at the time of verification.    it appears that the verification report, though generated, has not been uploaded, as required, in FORM GST REG-30 on the common portal.   The period stipulated for the same is 15 days commencing from the date when physical verification is carried out.