2023 (3) TMI 1001 - HC - GST

Revocation of cancellation of registration rejected - firm is not existing/ running from the registered place - contention of the Counsel for the petitioner is that the cancellation of the registration can be resorted to only when the conditions specified in sub-section 2 of Section 29 of the GST Act are attracted - HELD THAT - From the perusal of the order passed in appeal as well as the order cancelling the registration it is apparent that the respondents have committed error while deciding the issue on the ground that several firms were availing wrong ITC credit and were essentially bogus firms. This Court in the case of Apparent Marketing Private Limited 2022 (3) TMI 493 - ALLAHABAD HIGH COURT has already dealt with the said issue and has recorded that once registration is granted the same could be cancelled only in terms of the conditions prescribed under Section 29(2) and allegedly being a bogus firm is not a ground enumerated under Section 29(2). Following the said judgment and coupled with the fact that the respondents themselves have initiated proceedings against the firm under Section 74 the order rejecting the application for revocation was a wrong exercise of power by the department. The appellate order is equally bad inasmuch as no such ground was mentioned before passing the order of cancellation and thus the impugned orders 17.05.2021 and 14.09.2021 are set aside. Petition allowed.

Summary

Issues involved:
Challenge to order rejecting revocation of registration cancellation and dismissal of appeal against cancellation of registration.

Details of the judgment:

Challenge to order rejecting revocation of registration cancellation:
The petitioner, a registered Proprietorship firm, changed its business address and moved an amendment application which was approved. A survey conducted at the old business address revealed no business activity, leading to a show cause notice for cancellation of registration. The registration was cancelled based on allegations of availing fake ITC credit. The petitioner sought revocation of cancellation, but the application was rejected without a prior show cause notice. The Court held that cancellation can only occur under specific conditions outlined in Section 29(2) of the GST Act, none of which included the alleged ITC credit issue. The Court cited previous judgments to support its decision and set aside the order rejecting revocation.

Dismissal of appeal against cancellation of registration:
The Court found errors in the decision-making process by the authorities, noting that the ground for cancellation was not valid under Section 29(2). The Court emphasized that being a bogus firm is not a valid ground for cancellation. Additionally, the respondents had initiated proceedings under Section 74 for recovery of allegedly wrongly taken ITC credit, creating a contradiction in their stance. The Court concluded that the rejection of the revocation application and the dismissal of the appeal were improper exercises of power by the department. Therefore, the impugned orders were set aside, allowing the respondent to continue proceedings under Section 74 as per the counter affidavit.

Conclusion:
The writ petition was allowed, and the orders dated 17.05.2021 and 14.09.2021 were set aside. The Court clarified that the respondent could proceed with any ongoing proceedings under Section 74 in line with the counter affidavit.