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Order for cancellation of GST Registration based on the report of intelligence without making any independent enquiry by the officer is invalid: High Court

Petitioner

The petitioner a registered person and hereby challenging the orders cancelling his certificate of registration under the GST Act and rejection of his application for revocation of cancellation of registration certificate.

Petitioner drew my attention to the order of cancellation of registration and submitted that respondents have invoked provisions under Sub Section (2) of Section 29 of the CGST Act for cancellation of registration of the petitioner. However, the reasons stated in the impugned order are not in consonance with the powers conferred by the respondents for cancellation of registration. It is further submitted by the learned counsel appearing for the petitioner that the order for rejection of application for revocation of cancellation also suffers from non-application of mind and it is an unreasoned order, without mentioning any reason for rejection of application for revocation of cancellation. Learned counsel appearing for the petitioner submitted that the petitioner has honestly given all necessary particulars in the application for registration and no case is made out by the respondents that the registration has been obtained by the petitioner by means of fraud, willful misstatement or suppression of facts.

High Court

The impugned order is passed for the reason that the business place is situated in a building which is partially completed with structures only and no building number is affixed by the local authority. Even otherwise, the respondent department cannot go beyond the show cause notice issued by it to the petitioner, requiring the petitioner to defend the case against him as conveyed to him in the show cause notice. Thus, this Court will have to examine whether the reasons stated in the show cause notice, which is reproduced in the foregoing paragraph, can be construed as reason for cancellation of registration as per provisions of Sub Section (2) of Section 29 of the CGST Act, 2017. The answer to this question is found to be in negative, because Sub section (2) of Section 29 does not envisage the contingency of situation of place of business in a partially completed building having no building number affixed on it by the local authority. Such is not the reason as contemplated by Sub section (2) of Section 29, authorising the proper person to cancel the registration of a person in exercise of the powers conferred by the relevant provision of the statute. Consequently, the impugned order cannot stand in the scrutiny of law.

Consequently, the order of rejection of application for revocation of cancellation is also illegal and cannot stand in the scrutiny of law.

At this juncture, it is apposite to take note of Rule 25 of the CGST/SGST Rules. According to the provision of this Rule, where the proper officer is satisfied that the physical verification of the place of business of a person is required due to failure of Aadhaar authentication or due to not opting for Aadhaar authentication before grant of registration, or due to any other reason after the grant of registration, the proper officer may get verification of the place of business, in the presence of the said person, done. Thereafter, the verification report along with the other documents, including photographs, are required to be uploaded in FORM GST REG 30 on the common portal within a period of fifteen working days following the date of such verification.

In the case in hand, the State Tax Officer, Pala is the proper officer for assessment and he is a competent officer to invoke provisions of Rule 25. The State Tax Officer, Pala is also the registering authority of the petitioner. This officer has issued a notice to cancel the registration of the petitioner in FORM GST REG 17, based on the report of the intelligence officer. It is clear that the State Tax Officer, Pala has himself did not conduct any enquiry as contemplated in Rule 25. He proceeded further to cancel registration, despite the fact that the petitioner was aggrieved by the report of the intelligence officer as seen from the reply tendered by the petitioner. The proper officer, as such, ought not to have proceeded ahead with cancellation of the registration on the basis of report of the intelligence officer. The proper officer ought to have independently assessed the situation, particularly, when the petitioner had produced the receipt of the building tax from the local authority (Ext.P3) to prove the authenticity of his stand. This seems to have been not done by the proper officer. Without considering this document at Ext.P3, the registering authority had cancelled the registration. The application for revocation of cancellation of registration is also rejected by the respondent without proper enquiry in the matter.

The writ petition is allowed. The impugned orders are quashed and set aside. Consequently, the respondents are directed to restore the registration of the petitioner.

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