Case Law Details
Kundan Impex Vs Principal Commissioner of Department of Trade And Taxes (Delhi High Court)
Introduction: The Delhi High Court recently addressed the case of Kundan Impex Vs Principal Commissioner of Department of Trade And Taxes, where the petitioner challenged a show cause notice (SCN) dated 05.07.2023, leading to the suspension of their GST registration. The court’s decision sheds light on the importance of providing detailed reasons in such notices and the implications for businesses facing registration-related challenges.
Detailed Analysis: The petitioner contested the SCN, arguing that it lacked any specific reasons and only referred to a letter dated 12.06.2023 from the Assistant Commissioner (Okhla Division) GST, South Delhi Commissionerate. The petitioner emphasized that the copy of this letter was not provided, hindering their ability to respond effectively.
Upon issue of notice and with the consent of both parties, the court took up the case for final disposal. The respondent produced the letter dated 12.06.2023 during the proceedings, alleging that Neeraj Enterprises had issued invoices without actual supply of goods or services, passing fraudulent input tax credit to various recipients, including the petitioner.
However, the court noted that the letter did not specify which entry pertained to the petitioner or provide details about the alleged fraudulent transaction. The petitioner, highlighting a six-month halt in business operations due to the registration suspension, sought the cancellation of registration.
In its judgment, the court held that the SCN lacked requisite details and was unsustainable. The letter dated 12.06.2023 also failed to clarify the allegations against the petitioner regarding fraudulent input tax credit. Consequently, the court quashed the show cause notice.
While allowing the respondent to take further action in accordance with the law, including possible cancellation of registration with retrospective effect, the court stressed the importance of a proper show cause notice and an opportunity for the petitioner to be heard.
The petitioner was granted the option to apply for cancellation of registration according to the legal procedures. The court’s decision highlights the need for clarity and transparency in SCN for GST registration-related matters.
Conclusion: The Delhi High Court’s judgment in Kundan Impex Vs Principal Commissioner of Department of Trade And Taxes emphasizes the significance of providing detailed reasons in show cause notices related to GST registration. The decision protects businesses from arbitrary actions, ensuring a fair and lawful process in dealing with registration challenges.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns show cause notice dated 05.07.2023 whereby the registration of the petitioner has been suspended. Petitioner further seeks a direction to the respondent to cancel the registration of the petitioner from the date when the last return was filed i.e. in July, 2023.
2. Learned counsel for the petitioner submits that the show cause notice does not give any reason or detail but merely refers to letter dated 12.06.2023 of Assistant Commissioner (Okhla Division) GST, South Delhi Commissionerate. He submits that copy of the letter has also not been provided.
3. Issue notice. Notice is accepted by learned counsel appearing for the respondent. With the consent of the parties, the petition is taken up for final disposal today.
4. Learned counsel for the respondent has produced letter dated 06.2023 copy of which has also been handed over to learned counsel for the petitioner.
5. Perusal of letter dated 12.06.2023 shows that there is an allegation that one Neeraj Enterprises had issued invoices without any underlying supply of goods or services and passed on fraudulent input tax credit to various recipients and petitioner is alleged to be one of the such recipients.
6. From the perusal of Annexure-A annexed to the said letter, it is not apparent as to which entry pertains to the petitioner or invoice alleged to have been sent to the petitioner without any underlying supply of goods or services.
7. Learned counsel for the petitioner submits that petitioner does not intend to carry on any business in the same entity for the reason that the registration was suspended by the impugned show cause notice dated 05.07.2023 and petitioner for the last six months has not been able to carry on any business and he accordingly seeks cancellation of the registration.
8. Be that as it may, since we have held that the show cause notice does not contain the requisite details, the same is not sustainable and is liable to be quashed and even the letter dated 12.06.2023 does not give any clarity as to the allegation of availing of fraudulent input tax credit by the petitioner. Accordingly, the show cause notice is set aside.
9. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.
10. With regard to the contention of learned counsel for the petitioner for cancellation of the registration, it would be open to the petitioner to apply for cancellation of registration in accordance with law.
11. Petition is accordingly disposed of in the above terms.
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