GST Officer’s Inquiry Not a Trial: Kerala HC

Introduction:

Kerala High Court in M/s. Steel Indiavs the State Tax Officer, Nattika, Thrissur and Ors. [W.P.(C) WPC No.29033 of 2023 dated October 5, 2023]  clarified a critical distinction – an inquiry conducted by a GST officer is not tantamount to a trial. The case involved M/s. Steel India, a partnership firm, whose GST registration was canceled. The petitioner contested the cancellation, arguing that the orders were illegal and unjustified, particularly due to the absence of an opportunity for cross-examination regarding the business activities conducted at the registered premises.

Background of the Case:

M/s. Steel India, primarily engaged in the trade of iron and steel products, was registered under the Kerala Value Added Tax Act, 2003 until June 30, 2017. Subsequently, they obtained GST registration. However, they had to temporarily suspend their business operations from October 1, 2022, due to unforeseen circumstances, while continuing to comply with GST return filings.

The government authorities canceled their GST registration based on Section 29(2)(e) of the Central Goods and Services Tax (CGST) Act and Rule 21(a) of the Central Goods and Services Rules, 2017. The crux of the matter was whether the cancellation of GST registration was justified, especially when the petitioner contended that the cancellation orders were illegal and unjustified due to the absence of an opportunity for cross-examination regarding the business activities conducted at the registered premises.

The Court’s Verdict:

The Kerala High Court rendered the following significant determinations in its order dated October 5, 2023:

1. Cancellation Upheld: The court upheld the decision of the State Tax Officer to cancel M/s. Steel India’s GST registration. This decision was based on the absence of business activity at the declared location.
2. Not a Trial: The court emphasized that the inquiry conducted by the GST officer was not akin to a trial. Instead, it was a swift process designed to ascertain whether the registered dealer operated from the declared business address. In this case, the petitioner failed to provide supporting evidence or documents to substantiate their claim or change the business location.

The writ petition was dismissed, affirming the authority’s right to cancel registration after providing the dealer with an opportunity to be heard.

Conclusion:

This judgment from the Kerala High Court serves as a reminder that proceedings conducted by GST officers are not to be equated with full-fledged trials. They are swift inquiries aimed at verifying the accuracy of information provided in registration and compliance documents.

It also underscores the importance of being able to substantiate claims and changes in business operations with appropriate evidence. The burden of proof often lies with the taxpayer, and in this case, the petitioner’s inability to provide such evidence led to the cancellation of their GST registration.

For businesses and individuals dealing with GST compliance and registrations, this case highlights the significance of maintaining accurate records and documents to support their claims, especially in scenarios where regulatory authorities conduct inquiries to verify compliance.

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