Case Law Details
Gigamade Machineries Private Limited Vs State Of Gujarat (Gujarat High Court)
The Hon’ble Gujarat High Court in Gigamade Machineries Private Limited v. State of Gujarat [R/Special Civil Application No. 17599 of 2022 dated February 10, 2023] quashed and set aside the Show Cause Notice (“SCN”) and consequential order cancelling the GST Registration of the assessee, on the grounds of being violative of principles of natural justice, as the reasons for cancellation of GST Registration were not stated. Held that, the order is not only non-speaking but also cryptic in nature, which entails penal and pecuniary consequences and the Revenue Department ought to have referred to the contents of the SCN and have followed the principles of natural justice.
Facts:
Gigamade Machineries Private Limited (“the Petitioner”) is a firm to whom a SCN dated May 9, 2022 (“the Impugned SCN”) was issued by the Revenue Department (“the Respondent”) under Section 29 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) read with Rule 22(1) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) stating that, the Petitioner was found non-existing or non-functioning at the principal place of its business and proposing to cancel the GST Registration of the Petitioner. However, the Impugned SCN, did not disclose the basis for suo moto initiating process for cancellation of GST Registration.
The Petitioner filed a reply of the Impugned SCN stating that, it does not give any reasons for initiating process of cancellation of GST registration of the Petitioner and has been issued by a person who is not authorized in law to initiate process for cancellation of GST Registration. Subsequently, an order dated June 4, 2022 (“the Impugned Order”) was passed, cancelling the GST Registration of the Petitioner, wherein, the reasons for such cancellation were not mentioned.
Being aggrieved, this petition has been filed.
Issue:
Whether the Impugned Order passed for cancellation of GST Registration without specifying the reasons is maintainable?
Held:
The Hon’ble Gujarat High Court in R/Special Civil Application No. 17599 of 2022 held as under:
- Observed that, the Impugned SCN is absolutely vague, bereft of any material particulars and the Impugned Order is also vague and a non- speaking order.
- Stated that, the Respondent ought to have at least referred to the contents of the Impugned SCN and the response thereto, which was not done.
- Further stated that, the Respondent ought to have followed the principles of natural justice, which has not been done.
- Opined that, the Impugned Order is not only non-speaking but also cryptic in nature and the reason of cancellation of GST Registration of the Petitioner is not decipherable therefrom.
- Held that, the principles of natural justice stand violated and the Impugned Order entails penal and pecuniary consequences.
- Quashed and set aside the Impugned SCN and the Impugned Order.
- Permitted the Respondent to issue fresh notice for cancellation of GST Registration, in accordance with the law.
- Revived the GST Registration of the Petitioner.
Relevant provisions:
Section 29 of the CGST Act:
“Cancellation or suspension of registration.
(1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where––
(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:
Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.
(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 5 the return for a financial year beyond three months from the due date of furnishing the said return; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; 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.
(3) The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.
(4) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.
(5) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed:
Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed.”
Rule 22(1) of the CGST Rules:
“Cancellation of registration-
(1) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled.”
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. The petitioner is before this Court seeking to challenge the illegal action of respondent State Tax Officer cancelling of registration of the petitioner under the Gujarat Goods and Services Tax Act, 2017 (‘the GGST Act, 2017’ for short). The facts of the present case are epitomized as under :
2. The facts of the present case are epitomized as under :
2.1 The petitioner is a registered firm under the Gujarat Goods and Services Tax Act, 2017, having goods and service tax identification No.24AAICG3973D1ZO.
2.2 The State Tax Officer, Ghatak 15, Ahmedabad issued a show-cause notice dated 09.05.2022 Form GST REG-17/31. As averred, the notice was purportedly issued in exercise of powers under Section 29 of the CGST Act, 2017 read with Rule 22(1) of the Central Goods and Services Tax Rules, 2017.
The show-cause notice simply stated the following as the reason for issuance of the notice – “1. Taxpayer found non-functioning / not existing at the principal place of business”.
Pertinently, the notice was not accompanied by any document substantiating the allegation made against the petitioner in the show-cause notice. Also, the body of notice did not elaborate on the reason for the issuance of the show-cause notice and did not specify any particulars. The notice therefore in fact did not disclose the basis for suo moto initiating process for cancellation of registration.
2.3 In reply to the said show-cause notice, the petitioner has specifically stated that the notice does not give any reasons for initiating process of cancellation of GST registration of the petitioner and has been issued by a person who is not authorized in law to initiate process for cancellation of registration.
2.4 The State Tax Officer, Ghatak 15, Ahmedabad passed an order on 04.06.2022, cancelling the registration of the petitioner firm.
2.5 The petitioner submits that again, the order of cancellation did not record any reasons for cancellation of GST registration and only mentioned that the order of cancellation has been passed – “1. As per attached sheet”.
3. We have heard Mr. Maulik Nanavati, learned counsel appearing for Nanavati & Co. for the petitioner and Mr.Trupesh Kathiriya, learned Assistant Government Pleader appearing on advance copy for the respondent – State Authority. Rule. Learned AGP waives service of notice of rule on behalf of the respondent – State.
4. Recently, this Court had an occasion to deal with the issue of the procedural lapse on behalf of the State Authorities while dealing with the matters related to cancellation of registration under the GGST Act, 2017. The present matters are squarely covered by the decision of this Court in the case of Aggrawal Dyeing and Printing Works decided on 24.02.2022 in Special Civil Application no. 18860 of 2021 and allied matters.
5. On bare perusal of the contents of the show cause notice as well as the impugned order, we find that the said show cause notice is absolutely vague, bereft of any material particulars and the impugned order is also vague and a non speaking order. It cannot be disputed that with cancellation of registration, the dealer is liable to both civil and penal consequences. To say the least, The Authority ought to have at least referred to the contents of the show cause and the response thereto, which was not done. The authority ought to have followed the principles of natural justice, which has not been done in the present case. Not only the order is non speaking but cryptic in nature and the reason of cancellation not decipherable therefrom. In such circumstances, the principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. We, therefore, quash and set aside the show cause notice dated 09.05.2022 as well as the consequential order dated 04.06.2022. It would be open for the competent Authority to issue fresh notice for cancellation of registration, in accordance with law.
6. In view of the fact that we have quashed the show-cause notice dated 09.05.2022 and the order of cancellation of GST registration dated 04.06.2022, the respective GST registration stands revived, forthwith.
7. In light of above, the petition stands allowed. Rule is made absolute in above terms.
*****
(Author can be reached at [email protected])
Author Bio
