2023 (10) TMI 1292 - HC - GST

Cancellation of GST registration of petitioner - cancellation on the ground that Registration has been obtained by means of fraud, wilful misstatement or suppression of facts - HELD THAT - Though the show cause notice is vague, the petitioner seems to have submitted its reply dated 24.03.2023 with requisite particulars to the best of its ability. It clearly stated that to maintain proper supply chain and to have better control and operational efficiency on cost as well as convenience of operations, it applied for GST registration in A.P. by obtaining lease of part of the property owned by its parent company in Kuppam, Andhra Pradesh. The petitioner mentioned that all the TMT purchases of the petitioner are from its parent company and sales were spread over to different States. The observations of the 2nd respondent would reveal that mainly basing on the fact that the registration of the petitioner and its parent company emanate from same premises, the 2nd respondent, without verifying the records to know whether the petitioner involved in issuing and obtaining the fake invoices and doing fake business to avoid tax, came to the conclusion that the place of business shown by the petitioner is not suited for the present business activities and hence, recommended for cancelation - it cannot be comprehended, even if the place of business of the petitioner for argument sake is not conducive for its business, how the said fact can be treated as sufficient to conclude that the petitioner obtained registration by committing fraud or wilful misstatement or suppression of facts. In spite of the petitioner s submission that the complete details of purchases and sales can be verified at any point of time, the 2nd respondent without resorting to such logical and legal exercise, simply carried away by the recommendations of the Inspecting Authority i.e., Deputy Assistant Commissioner who on a conjuncture suspected that the taxpayer may be engaged in bill trading without proper receipt and supply of goods, for which there is no proper basis. Therefore, the impugned registration cancellation order is not sustainable in the eye of law. The cancellation order dated 20.04.2023 passed by 2nd respondent and the appellate order dated 07.07.2023 passed by 1st respondent are set aside with a direction to the respondent authorities to restore the GST registration of the petitioner within one (1) week from the date of receipt of a copy of this order - Petition allowed.

Summary

Issues Involved:
1. Legality of the cancellation of GST registration.
2. Adequacy of the show cause notice.
3. Evaluation of the appellate order.

Summary:

Issue 1: Legality of the cancellation of GST registration

The petitioner, M/s. Sakthi Steel Industries India Private Limited, challenged the order dated 07.07.2023 by the 1st respondent and the order dated 20.04.2023 by the 2nd respondent, which cancelled the petitioner's GST registration. The cancellation was based on the allegation that the petitioner's registration was obtained by fraud, wilful misstatement, or suppression of facts, primarily because the petitioner and its parent company operated from the same premises.

Issue 2: Adequacy of the show cause notice

The show cause notice dated 20.03.2023 was criticized for being vague and lacking specific details of the alleged fraud, wilful misstatement, or suppression of facts. The court emphasized that the notice did not provide sufficient particulars to allow the petitioner to submit an apt and appropriate reply, thus violating the principles of natural justice.

Issue 3: Evaluation of the appellate order

The appellate order by the 1st respondent was found to have committed the same error as the 2nd respondent by confirming the cancellation without a thorough examination of relevant records. The court noted that the mere commonality of the location of the petitioner and its parent company was insufficient to conclude fraud or bill trading without proper scrutiny of records such as account books, e-waybills, and transportation particulars.

Conclusion:

The writ petition was allowed, and the cancellation order dated 20.04.2023 and the appellate order dated 07.07.2023 were set aside. The court directed the respondent authorities to restore the GST registration of the petitioner within one week. The authorities were permitted to issue a new show cause notice with requisite particulars and conduct an enquiry following due process of law.

Final Order:

The Writ Petition is allowed, and the cancellation and appellate orders are set aside. The authorities are instructed to restore the GST registration within one week and may issue a new show cause notice if necessary. No costs. Interlocutory applications, if any, are closed.