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Cancellation of GST Registration without providing opportunity for personal hearing is invalid: High Court

High Court further mentioned that show cause notice issued to taxpayer without mentioning date and time for personal hearing is also invalid.

Facts

Petitioner is a proprietorship concern engaged in the business of purchase and sale of Iron and Steel Goods.

By means of a show cause notice dated 12.5.2021, the petitioner was directed to show cause within seven working days from the date of service of the notice why its registration should not be cancelled. The petitioner submitted its reply on 24.5.2021 but, by means of an order dated 28.5.2021, the registration of the petitioner was cancelled for the reason that no one was found at the place of the business and neither any business activity nor any bill book were found at the time of survey and the landlord of the premises had informed the survey team that no one came there to start a business and no business activity takes place there. The order further observes that after scrutinizing the return, it was found that the petitioner had purchased goods worth ₹ 29,50,000/- from non-existing dealers and availed bogus input tax credit with mala fide intention. It was also found that after granting registration, the petitioner did not furnish bank account details in due time in terms of Rule 10A.

The appeal filed by the petitioner before respondent no.3 was also dismissed, citing the very same reasons as in the order of cancellation.

Petitioner

The contention of the learned counsel for the petitioner is that the show cause notice reveals no details as to whether any survey had actually taken place or not and that what was the date and time fixed for personal hearing. It is contended that the show cause notice which is an imperative compliance of the principles of natural justice, was mandatorily required to furnish basic details regarding the date and time of personal hearing.

Learned counsel has drawn attention of the Court to paragraph No.11 of the writ petition, in which a categorical averment has been made that after issuance of show cause notice, no opportunity of hearing was granted to the petitioner by the respondent no. 4 and neither any date was fixed for hearing nor the petitioner was called to place its case before the respondent no.4. It is contended that this paragraph has not been replied by the respondents in the counter affidavit. It is, therefore, contended that the order impugned cancelling registration of the petitioner having been passed without affording an opportunity of hearing to the petitioner in violation of first proviso to sub-section (2) of Section 29 of the Act of 2017 is a nullity in the eyes of law and deserves to be set aside. It is contended that the order passed in the appeal having failed to notice the averments made on behalf of the petitioner, is also liable to be set aside.

The show cause notice dated 12.5.2021 issued by authority reads as follows:

“Form GST REG-17/31

(See Rule 22(1)/sub-rule (2A) of rule 21A)

Reference Number: ZA090521025026Y                                              Date: 12/05/2021

To

SACHIN SANGAL

6,NEAR KIRAN FARMS HOUSE WALI GALI, BAMANHERI, ROORKEE ROAD, MUZAFFARNAGAR, Muzaffarnagar, Uttar Pradesh-251001.

Show cause notice for Cancellation of Registration

Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:

1. Taxpayer found Non-Functioning/Not Existing at the Principal Place of Business.

You are hereby directed to furnish a reply to the notice within Severn working days from the date of service of this notice.

If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.

Please note that your registration stands suspended with effect from 12.5.2021.

Place: Uttar Pradesh.

Date: 12.5.2021

Vinod Mitra

Assistant Commissioner,

Muzaffar Nagar Sector-3, Muzaffarnagar,Saharanpur Uttar Pradesh”.

 

Form GST REG-17 that is prescribed under Rule 22 (1) of the UP GST Rules, 2017 is as follows:

Form GST REG-17

[See rule 22(1)]

Reference No.                                                                             Date

To

Registration Number (GSTIN/UIN)

(Name)

(Address)

Show Cause Notice for Cancellation of Registration

Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:-

1.

2.

3.

………

You are hereby directed to furnish a reply to this notice within seven working days from the date of service of this notice.

You are hereby directed to appear before the undersigned on DD/MM/YYYY at HH/MM. If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.

Place:

Date:

Signature

(Name of the Officer)

Designation

Jurisdiction.

[Note: Your registration stands suspended with effect from ------(date).]

A bare perusal of the show cause notice format prescribed under Rule 22(1) shows that there is a difference in the show cause notice dated 12.5.2021 issued to the petitioner and in the form of the show cause notice quoted aforesaid. The specific date and time is necessarily required to be mentioned in the notice for showing cause which is conspicuous by its absence in the notice to the petitioner. Moreover, the proviso to subsection (2) of Section 29 mandates opportunity of hearing being provided to the person whose registration is proposed to be cancelled before cancelling the registration.

In the considered view of this Court, the denial of opportunity of hearing to the petitioner as is mandated in the first proviso to sub-section (2) of Section 29 of the Act of 2017 vitiates the proceedings as well as the orders cancelling the registration of the petitioner.

The reference made by the learned Standing Counsel to sub-section (1) of Section 29 of the Act of 2017, in the opinion of the Court is not correct. The provisions of sub-section (1) of Section 29 would come into play where (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or (b) there is any change in the constitution of the business; or (c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24. The learned Standing Counsel has not been able to demonstrate that the case of the petitioner is liable to be covered under any of the three clauses as aforesaid. Sub- Section (1) of Section 29 would come into play only in the given set of circumstances that are mentioned in sub-section (1) and for no other reasons.

In view of the facts and circumstances narrated above, the order of cancellation of registration dated 28.5.2021 as well as order passed in the appeal dated 17.7.2021 are quashed.


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Author:

TaxReply


Nov 17, 2021

Comments


Pls provide case number and year and court.
By: Senthi Kumar | Dt: Nov 29, 2021


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