2024 (3) TMI 744 - HC - GST

Cancellation of GST registration of petitioner - Interpretation of statute - Rule 22 (3) of CER - date of reply to SCN - whether the expression used shall issue an order within a period of 30 days is mandatory or directory? - HELD THAT - Rule 22 (3) of the Rules refers to two separate proceedings. One initiated by the taxpayer by submitting an application seeking cancellation of registration and the other by the proper officer by issuance of show cause notice for cancellation of the registration. The timeline provided for issuance of an order is 30 days for both the proceedings. If the intention was that the proper office would forfeit the right to pass an order, then an anomalous situation would arise with regard to proceedings where the taxpayer voluntarily applies for cancellation. If the proper officer, qua the said proceedings, also forfeits the right to issue an order, then the application seeking cancellation would be deemed to be rejected and the taxpayer would continue to remain registered despite his desire to seek cancellation of registration. The expression shall issue an order used in Rule 22 (3) of the Rules cannot be construed as mandatory for proceedings under Rule 21 and directory for proceedings under Rule 20. Accordingly, we hold that the expression shall be passed within 30 days used in Rule 22(3) of the Rules is not mandatory but is only directory. The contention of learned counsel for the petitioner cannot be accepted that the authorities have lost the right to pass an order after the lapse of period of 30 days of the filing of the reply by the petitioner to the Show Cause Notice issued under Rule 21 of the Rules. The petition is accordingly disposed of directing the Proper Officer to expeditiously pass an order on the Show Cause Notice, preferably within a period of two weeks from today.

Summary

Issues Involved:
1. Validity of the Show Cause Notice issued on 22.06.2023.
2. Whether the Show Cause Notice has lapsed under Rule 22(3) of the Central Goods and Service Tax Rules, 2017.
3. Interpretation of the mandatory or directory nature of the timeline in Rule 22(3).

Summary:

1. Validity of the Show Cause Notice issued on 22.06.2023:
The petitioner challenged the Show Cause Notice dated 22.06.2023, which suspended their GST registration due to "No business activity found in the premises, no documents and stock was available at business premises at the time of visit dated 16.06.2023. The premises is a residential floor and no additional place of business mentioned in the GST Registration."

2. Whether the Show Cause Notice has lapsed under Rule 22(3) of the Central Goods and Service Tax Rules, 2017:
The petitioner argued that the Show Cause Notice issued on 22.06.2023 had not been adjudicated and, as per Rule 22(3), it should be deemed to have lapsed. The respondent contended that a physical verification confirmed no business activity at the registered address, which was a residential premises.

3. Interpretation of the mandatory or directory nature of the timeline in Rule 22(3):
The court examined whether the expression "shall issue an order within a period of 30 days" in Rule 22(3) is mandatory or directory. The court referred to various judgments, including *Manickam v. Vasantha* and *May George v. Tahsildar*, to determine that the timeline is directory, not mandatory. The court concluded that the absence of a stipulation for automatic forfeiture of the right to pass an order implies that the condition is directory.

Conclusion:
The court held that the authorities have not lost the right to pass an order after the lapse of 30 days from the filing of the reply by the petitioner. The petition was disposed of with a direction to the Proper Officer to expeditiously pass an order on the Show Cause Notice within two weeks. The court clarified that it has not considered or commented on the merits of the contentions of either party, reserving all rights and contentions.