2023 (12) TMI 1167 - HC - GST

Cancellation of GST registration of the premise - availment of of input tax credit without there being any corresponding movement of goods - non-application of mind - HELD THAT - A bare reading of the provision would clearly demonstrate that the invocation of the provisions of Sub-Section 2(a) of Section 29 of the A.P.G.S.T. Act, is available only in the event of there being a determination by a competent Tribunal or Court holding that the registered dealer has in fact contravened the provisions of the Act. It is not in dispute and it is clearly admitted by the learned Government Pleader that the petitioner firm is a going concern, implying and meaning thereby that the petitioner is also providing livelihood to others. In the event, their registration is cancelled, it would automatically result in closure of business and would sound a death knell to the productivity of the petitioner resulting in loss of livelihood, not only to the management, but also to such other persons employed by them. The Writ Petition deserves to be allowed in part.

Summary

Issues involved:
The cancellation of registration by the Directorate General of GST Intelligence (D.G.G.I.) on the grounds of alleged fraudulent availing of input tax credit without corresponding movement of goods.

Issue 1: Allegation of fraudulent availing of input tax credit
The petitioner challenged the cancellation of registration, arguing that it was premature and based on unproven allegations. The petitioner was accused of claiming input tax credit without any supporting activity, which the authority deemed as a contravention of the law.

Issue 2: Interpretation of Section 29 of the A.P.G.S.T. Act
The Government Pleader cited Section 29(2)(a) of the A.P.G.S.T. Act, which allows cancellation of registration if a registered person contravenes the Act's provisions. The Court noted that the term "contravention" implies a past finding of violation by a judicial or quasi-judicial authority, which was lacking in this case, making the cancellation premature.

Issue 3: Impact of cancellation on business and livelihood
Acknowledging the petitioner as a going concern providing livelihood to others, the Court viewed cancellation as a severe measure that could lead to business closure and loss of livelihood. Emphasizing that cancellation should be a last resort for cases involving fraud causing state loss, not a routine or default action.

The Court found that the cancellation of registration was premature as there was no conclusive finding of contravention by a competent authority. Despite the petitioner's admission of infractions during D.G.G.I. proceedings, no official determination had been made. The Court highlighted that restoration of registration was not within the authority's power and ruled in favor of the petitioner, setting aside the impugned order and restoring the registration. The Court reserved the right for the respondents to restart the process only after a competent Tribunal or Court determines the petitioner's contravention of statutory provisions. The judgment allowed the writ petition in part with no costs awarded, and directed the closure of any pending miscellaneous petitions.