Please find the article “Analysis of Cancellation of GST Registration with Case Law” to be published in your august site. The article is analysing on if the cancellation was done without consider conditions stipulated under section 29(2) of the Act. The latest judgement of the Allahabad High Court has been considered in this article. The readers will get more clarity in this issue.
In this article it shall be discussed that the proper officer may cancel the registration if any of the five conditions and the condition of the first proviso to the sub-section 2 of section 29 of the CGST Act are fulfilled. The Proper Officer cannot quote his own reason and go beyond the reasons stated in the said section for purpose of cancellation of registration. Section 29(2) of the CGST Act is reproduced as under:
(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,—
(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or
(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or
(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:
Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard:
Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.
The Hon’ble Allahabad High Court set aside the cancellation order which was passed by the Proper Officer with reason not being matched with reason as stated under section 29(2) of the CGST Act in the case of APPARENT MARKETING PRIVATE LIMITED Vs STATE OF U.P. 2022-VIL-193-ALH. Validity of Cancellation of GST Registration in the absence of specify the exact reason or charge on which registration proposed to cancel the registration cannot be accepted.
On the basis of the said judgement analysis of the section 29(2) of the CGST Act is done as under:
1. Cancellation of Registration has serious consequences It takes away the fundamental right of a citizen etc. to engage in a lawful business activity.
2. The Registration has been granted by the GST Authority after due verification of the necessary facts.
3. If the Authority proposed to cancel the registration thus granted, a heavy burden lay on the authority to establish the existence of facts as may allow for such cancellation of registration.
4. The registration once granted could be cancelled only if one of the five statutory conditions stated under section 29(2) of the CGST Act was found present.
5. The only reason the firm was bugus, could not become the reason for cancellation of registration.
6. The only contingency to which such expression (bogus) may relate may be one appearing under Clauses (c) and (d) of Section 29(2) of the Act being where a registered firm does not commence its business within six months of its registration or the registered firm has not furnished its return for continuous period of six months.
7. Notice should be issued with specific reason for cancellation of registration. It (notice) ought to have mentioned (in the show cause notice), if it proposed to cancel the registration for violation of Section 29(2)(c) of the Act or for violation of Section 29(2)(d) of the Act. It cannot be a matter of contemplation or option either with the authority or the assessee to find out for itself by any guesswork or exploratory exercise.
8. Registration having been granted earlier; the obligation existed on the authority to specify the exact reason/charge on which it proposed to cancel the registration.
9. By merely describing the assessee firm “bogus”, the authority did not make known to the assessee the exact charge that was being levelled against the assessee. Correspondingly, the authority deprived the assessee of the necessary opportunity to rebut the charge.
10. The statute contemplates issuance of the notice in specified circumstances for specific grounds. Those could not be diluted or muddled or made vague by describing the assessee firm as “bogus”. In absence of any specific charge, the respondent authority could not be permitted to proceed to cancel the assessee’s registration.
11. It is obligatory upon the Authority to issue further notice if the order could not be passed on the date stated on the notice.
To reach to me for any suggestions, rectifications, amendments and/or further clarifications in regard of this article my email address is [email protected].
(PARVEEN KUMAR MAHAJAN)
Advocate
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