LEGALITY OF FORM GST REG -17 FOR CANCELLATION OF REGISTRATION IN THE LIGHT OF OPPORTUNITY OF BRING HEARD
GST registration is the basic and mandatory requirement for the business entities having a threshold turnover to run his business. The Section 29 of CGST Act, 2017 read with Rule 22 of CGST Rules, 2017 prescribes procedure and conditions under which GST registration can be cancelled. Cancellation of GST registration implies that the person is no more entitled to avail the benefits of registration such as availment of ITC, transfer of ITC, claim of refund etc. While at the same time, all penalties/liabilities arising out of GST laws shall remain intact. Cancellation of GST registration shall also put a complete halt to the business of the person as in absence of the availment of ITC, no one would like to purchase from him. Therefore, cancellation of GST registration is a huge penal provision of GST.
Rule 22(1) of CGST Rules prescribed FORM GST REG-17 for issuance of SCN for cancellation of registration. The language of FORM GST REG-17 prescribes that:
“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: –
You are hereby directed to furnish a reply to this notice within seven working days from the date of service of this notice.
You are hereby directed to appear before the undersigned on DD/MM/YYYY at HH/MM
If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.”
This very simple GST REG-17 FORM allows authority to issue SCN for cancellation of GST registration merely by mentioning the reasons on which authority feels to cancel the registration and seeks the person to file reply within a small span of seven days to justify himself.
Here, two important points need to be emphasizes:
1. Grounds for issuance of SCN and support thereof- Mere belief of the authority is sufficient of issuance of SCN as neither section 29 of CGST Act, 2017, Rule 22 of CGST Rules, 2017 nor FORM GST REG-17 mandates for providing any supporting document to the assessee on the basis of which this belief is formed. Absence of documents/information on the basis of which authority decided to issue SCN gives despotic, unreasoned and autocratic discretion to the SCN issuing authority.
2. Opportunity of being heard- Proviso to section 29(2) of CGST act, 2017 provides that “proper officer shall not cancel the registration without giving the person an opportunity of being heard.” It means the assessee must be provided with an opportunity of being heard before taking decision as to cancellation of the registration. Now the questions arise:
3. Whether absence of supporting documents/information on the basis of which SCN is issued justify ‘opportunity of being heard.’ Even though the assessee is given a time period to submit reply/ appear before the authority, the absence of ‘basis of reason to believe’ completely negates the concept of ‘opportunity of being heard.’ The ‘opportunity of being heard’ as mentioned in Proviso to section 29(2) of CGST act, 2017 demands that ‘opportunity of being heard’ must be a reasonable opportunity of being heard.
4. Whether time period of seven days is sufficient to close down someone’s business- The SCN is sent to a person by e-mail which was registered with GSTN while migration/registration of GST No. At the time of migration/registration of GST No., e-mail IDs, phone no. etc of employee, advocate, Chartered Accountant etc. were entered who may not be serving the assessee anymore and assessee may not be able to get the intimation of SCN and all of a sudden, his registration gets revoked. Assume the implications!!
CGST Act, 2017 uses the word “opportunity of being heard” for 21 times and CGST Rules, 2017 uses the word “opportunity of being heard” for 09 times at various stages such as, detention, seizure, penalty, adjudication, appeal, cancellation of registration, receipt of application, advance ruling, revision, audit, refund etc. In such cases, the authority must act in accordance with the principles of natural justice which require that the party affected must be given a fair opportunity of being heard. This is especially so where grave charges are brought against a person who may be visited with serious consequences by the decision of the Authority.
The documents/information on the basis of which authority has ‘reason to believe’ which is absent in FORM GST REG-17 must form part of the FORM GST REG-17 so that the assessee can understand the real crux of the notice, understand the basis of ‘reason to believe’, thereby, avail a ‘reasonable opportunity of being heard’ and submit a suitable reply.