Case Law Details
VAB Apparel LLP Vs Commissioner, Delhi GST And Ors (Delhi High Court)
Introduction: VAB Apparel LLP recently faced a legal challenge against the cancellation of its GST registration by the Commissioner, Delhi GST, and others. The petitioner contested an order dated 23.05.2022, arguing that the cancellation, effective from 05.03.2018, lacked proper grounds as per the Show Cause Notice (SCN) issued on 19.05.2022.
Detailed Analysis: The heart of the matter lies in the lack of substance in the SCN. The reasons cited for cancellation, involving fraud, wilful misstatement, or suppression of facts, were vague. Despite being granted seven working days to respond, the petitioner’s GST registration was canceled just four days after the SCN was issued. The impugned order pointed to an improper response, absence of documentary evidence, and no appearance for a personal hearing as the basis for cancellation.
However, a critical examination reveals the absence of specific details about the alleged fraud or misstatement. The order, dated 23.05.2022, failed to specify any material particulars regarding the charges against the petitioner. Furthermore, the retrospective cancellation to 05.03.2018, the date of initial registration, lacked a justified explanation.
The respondents later provided a cryptic reason for cancellation, claiming the party was non-functioning, and both buyers and suppliers were suspicious. Notably, the petitioner’s closed shop was cited as a ground for cancellation. The court, however, emphasized that the mere closure of the shop, without additional evidence, does not justify the cancellation of the GST registration.
The court, in its judgment, set aside the impugned order, directing the authorities to restore VAB Apparel LLP’s GST registration. It clarified that this decision does not prevent further legal action if the petitioner is found in violation of statutory provisions.
Conclusion: The case of VAB Apparel LLP vs. Commissioner, Delhi GST, and others highlights the importance of clear and substantiated grounds for canceling GST registration. The court’s ruling underscores that a closed shop alone is insufficient justification and emphasizes the need for specific details and evidence when alleging fraud or misstatements. The judgment provides relief to VAB Apparel LLP, ensuring the restoration of its GST registration while preserving the authorities’ right to take lawful action if statutory violations are proven.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present petition impugning an order dated 23.05.2022 (hereafter ‘the impugned order’) cancelling the petitioner’s GST registration with effect from 05.03.2018. The said order was passed pursuant to a Show Cause Notice dated 19.05.2022 (hereafter ‘the SCN’).
2. A plain reading of the SCN indicates that the petitioner’s GST registration was proposed to be cancelled for the following reasons:
“In case, Registration has been obtained by means of fraud, wilful misstatement or suppression of facts.”
3. The petitioner was directed to respond to the SCN within seven working days and to appear before the concerned officer on 23.05.2022. The petitioner’s GST registration was also suspended with effect from the date of issuance of the SCN.
4. It is apparent from the above that the SCN is bereft of any material particulars. It neither specifies the fraud alleged to have been committed by the petitioner nor any alleged wilful misstatement made by the petitioner. The SCN also did not mention any facts that were allegedly suppressed by the petitioner.
5. Although, the petitioner was granted seven working days to respond to the SCN, the Proper Officer did not wait for the said period to expire and the impugned order cancelling the petitioner’s GST registration was passed four days later.
6. The only reasons stated in the impugned order are that the petitioner’s response to the query was not proper; no documentary evidence had been produced by the taxpayer; and none had appeared for personal hearing. The impugned order neither refers to any fraud that was found to have been committed by the petitioner nor mentions any misstatement allegedly made by the petitioner.
7. It is also relevant to note that although the SCN did not propose the cancellation of the petitioner’s GST registration with retrospective effect yet the petitioner’s GST registration has been cancelled with effect from 05.03.2018, that is, the date on which the said registration was granted.
8. The learned counsel appearing for the respondents submits that although the SCN as well as the impugned order did not specify any reason for cancellation of the petitioner’s GST registration, the respondent’s portal reflected the following reason for cancellation of petitioner’s GST registration:
“Party was found existent but non-functioning. Buyer and suppliers found suspicious. Mobile phone number mentioned in registration was not responded by the taxpayer.”
9. The aforesaid reason, which the respondents seek to rely on, is also cryptic. There is no explanation as to why the buyers and suppliers have been found to be suspicious. Merely because the petitioner’s shop was found closed, absent anything more, is not a ground for cancellation of petitioner’s GST registration.
10. In view of the above, the petition is allowed.
11. The impugned order cancelling the petitioner’s GST registration is set aside. The respondents are directed to restore the same forthwith.
12. However, it is clarified that this would not preclude the respondents from taking any action against the petitioner in accordance with law, if the petitioner is found to be in violation of any statutory provisions.
13. The petition is disposed of in the aforesaid terms.
