GST Department has to take pragmatic view in cancellation of GST Registration because a taxpayer is not to be treated as a person hostile to the department: High Court

Petitioner:

1. The appellant had filed the writ petition challenging the show cause notice for cancellation of his GST Registration.

2. The primary ground for challenge is that there is no final order of adjudication passed by the authority quantifying the tax liability. Consequently the show cause to cancel the registration on the alleged ground of failure to pay tax and penalty would not arise.

3. Various summons have been issued by the authorities in the case. But till date no show cause notice has been issued to the appellant. If that be so the liability is yet to be quantified.

Held:

Quantification of liability arises after issuance of show cause notice and following the process of adjudication.

That apart, it is not clear as to why the Department has been prolonging the matter for such a long period without taking the issue to its logical end.

The matter can attain finality if a show cause notice is issued and adjudication is done by the authority. This procedure undoubtedly has not been followed in the case on hand.

If such be the factual position a show cause notice proposing to cancel the registration of the appellant would not be sustainable. Furthermore, we note that pending consideration of the show cause notice for cancellation the appellant’s registration has been suspended.

In our view, suspension of a license of a dealer will be counterproductive and would work against the interest the revenue. We say so because if the registration of a dealer is cancelled, the dealer cannot carry on its business in the sense that no invoice can be raised by the dealer. This would ultimately impact the recovery of taxes. Therefore, the respondent department has to take a pragmatic view in the matter because a taxpayer is not to be treated as a person hostile to the department. Undoubtedly if the taxpayer has adopted dubious process to evade payment tax then he has to be dealt with firmly.

In the light of the above, we are of the view that suspension of the appellant’s registration should be revoked forthwith with a direction to the appropriate authority to issue show cause notice within a time frame and take up the adjudication proceeding.

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Cancellation of GST Registration

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