Case Law Details
Haradiya Enterprises Vs Superintendent of Central Tax (Karnataka High Court)
Summary: The Karnataka High Court, in Haradiya Enterprises v. Superintendent of Central Tax, ruled that suspending a taxpayer’s GST registration pending an enquiry into alleged irregularities is excessive. The petitioner, a registered dealer, received a show cause notice (SCN) on October 14, 2024, citing Rule 21(b) of the CGST Act, which allows cancellation if invoices are issued without actual supply of goods or services. The notice also immediately suspended the petitioner’s GST registration. The petitioner submitted a reply and multiple representations, asserting compliance with GST obligations and denying any fraudulent input tax credit claims. However, the authorities did not consider the response before enforcing the suspension, leaving the petitioner unable to conduct business.
The Court held that suspending GST registration without reviewing the petitioner’s reply was unjust, especially when the enquiry could take time. It directed the tax authorities to revoke the suspension immediately while granting them the liberty to proceed with the enquiry and take action in accordance with the law after due consideration. The ruling ensures that businesses are not unduly affected by procedural actions before a final decision is reached.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. The petitioner is a dealer registered under the provisions of the Karnataka Goods and Services Act/Central Goods and Services Act, Respondent has issued a show cause notice dated 14.10.2024 to the petitioner for cancellation of registration of GST, the same reads as under:
“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. Rule 21(b)-person issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder
You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.
You are hereby directed to appear before the undersigned authority on 18/10/2024 at 11:30.
If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed dated 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 14.10.2024.”
2. The petitioner submits that pursuant to the show cause notice, he has appeared before the respondent and he has submitted his reply and also gave several representations to the show cause notice showing how he has been regular in payment of GST and has not committed any default and has not fraudulently claimed any input tax credit nor he has violated any provisions of any His grievance is that instead of considering his reply and passing the appropriate orders, by way of impugned show cause notice with effect from 14.10.2024 itself his GST registration has been suspended and he is not in a position to carry on his business.
3. Learned counsel appearing for the respondent justifies the action of the respondent in suspending the GST registration of the petitioner and prays for dismissal of the writ petition.
4. Admittedly, the petitioner is a registered dealer under the provisions of The respondent has initiated an enquiry into certain alleged irregularities committed by the petitioner. The petitioner has replied to the said show cause notice. Under the said circumstances, in my opinion, it would be appropriate for the respondent to consider the reply of the petitioner and thereafter pass suitable orders in accordance with law and the act of respondent in suspending the GST registration of the petitioner pending enquiry would be too harsh on the petitioner as he would not be in the position to conduct his business and the enquiry may take some time. Hence, the following:
ORDER
i) The respondent is hereby directed to revoke the suspension of the GST registration of the petitioner which has been done as per show cause notice dated 14.10.2024 (vide Annexure- A to the writ petition) forthwith;
ii) However, respondent is granted the liberty to take appropriate decision on revoking the GST registration of the petitioner or suspending it or otherwise after considering the reply of the petitioner to the show cause Same shall be done by the respondent in accordance with law;
iii) The writ petition is disposed of accordingly.
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