Case Law Details
Mira Industries, through its proprietor Kamilbhai Ikbalbhai Boghani Vs State of Gujarat & Ors. (Gujarat High Court)
In the case of Mira Industries vs. State of Gujarat, the Gujarat High Court examined a petition by Mira Industries, a business engaged in trading petroleum products, challenging the cancellation of its Goods and Services Tax (GST) registration. The petitioner sought various reliefs, including the quashing of orders issued by the tax authorities regarding the cancellation of its GST registration, which originally took effect from May 24, 2021. The court considered the procedural irregularities involved in the cancellation process, noting that the petitioner was not adequately notified of the proceedings against it, which led to a violation of natural justice principles.
The petitioner had initially applied for the cancellation of its GST registration in November 2021, but this request was denied due to alleged discrepancies in the documentation. Following this, a show cause notice was issued, and despite the petitioner’s lack of awareness about the notice, the registration was cancelled retrospectively. The court highlighted that the subsequent appeals filed by the petitioner were also dismissed without sufficient reasoning, further compounding the lack of procedural fairness. Ultimately, the court quashed the cancellation order, mandating that the assessing authority provide detailed reasons for the cancellation and allow the petitioner to respond before making a new determination on the GST registration.
The decision underscores the importance of procedural correctness and the necessity for authorities to adhere to principles of natural justice, particularly in cases involving significant administrative actions like the cancellation of a business’s tax registration. The court emphasized that proper communication and documentation are critical to ensuring that businesses can adequately defend themselves in administrative proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Apurva Mehta for the petitioner and learned Assistant Government Pleader Mr. Chintan Dave for the respondent State.
2. By this petition, the petitioner has prayed for the following reliefs:
“(A) YOUR LORDSHIPS may be pleased to admit and allow the present Petition.
(B) YOUR LORDSHIPS may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction quashing and setting aside the impugned Order dated 25.10.2023 passed by the Ld. Respondent No. 3 [Annexure JJ as well as the Order dated 14.12.2021 passed by the Ld. Respondent No. 2 [Annexure E] and thereby restore the registration of the Petitioner Firm w.e.f. 24.05.2021.
(C) YOUR LORDSHIPS may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction and direct the Ld. Respondents to revoke the cancellation of Petitioner’s GST Registration and thereby restore the same w.e.f. 24.05.2021.
(D) Pending hearing and final disposal of the present petition, YOUR LORDSHIPS may be pleased to revoke the cancellation of the Petitioner’s GST
(E) Ex-parte ad-interim relief in terms of Para (D) may kindly be granted;
(F) Pass any such other and / or further orders that may be deemed just and proper, in the facts and circumstances of the present case.
3. Brief facts of the case are that the petitioner, a proprietary concern is carrying on the business at Morbi and is doing the business of trading in Light Diesel Oil, Petroleum Oils, etc. for industrial use. For the said purpose, the petitioner is registered under the GST Acts with registration no. 24FKRPB6163F1Z3 w.e.f. 24.05.2021. The petitioner is also a regular taxpayer under the GST Acts.
4. It is the case of the petitioner that the aforesaid registration under the GST Acts was granted by the competent authority after a thorough verification. The application for grant of registration was made on 02.04.2021 by the petitioner. A notice dated 29.04.2021 seeking additional information / clarification / documents relating to application for registration came to be issued by the respondent No. 2 which was duly responded by the petitioner on 05.05.2021. The competent authority thereafter granted the aforesaid registration under the GST Acts on 24.05.2021.
5. It is the case of the petitioner that on account of closure of the business, the petitioner applied for cancellation of registration on 01.11.2021. A notice dated 01.11.2021 seeking additional information / clarification / documents relating to application for cancellation came to be issued by the respondent No. 2 which was duly responded by the petitioner. The Respondent No. 2, vide order dated 30.11.2021, rejected the application for cancellation of registration on the ground “Documents Uploaded Are Having Significant Discrepancies, Hence Application Deserves To Be Rejected.”
6. Thereafter on 30.11.2021 the petitioner was issued an online show cause notice by the respondent No. 2 calling upon to reply as to why the registration should not be cancelled. The petitioner was also given time to respond to the show cause notice within seven working days. However, date of personal hearing was fixed within three days on 03.12.2021. The registration of the petitioner was also suspended w.e.f. 30.11.2021.
7. It is the case of the petitioner that the petitioner, being not aware about the aforesaid online show cause notice dated 30.11.2021, failed to file its reply within the prescribed time limit. Respondent No. 2 thereafter cancelled the registration of the petitioner with retrospective effect from 24.05.2021 vide an online order dated 14.12.2021. It is the case of the petitioner that respondent No. 2 also raised additional dues in the aforesaid order without following the statutory procedure and without putting the petitioner to any notice for the same.
8. It is the case of the petitioner that as soon as the same came to the knowledge of the petitioner through its customers, the petitioner preferred an application on 06.05.2023 for revocation of cancellation of registration. In response to the said application, respondent No. 2 issued a show cause notice dated 11.05.2023 for rejection of application for revocation of cancellation of registration on the ground that since the registration of the petitioner was cancelled for reasons of availing the same by means of fraud, misstatement and suppression of facts from retrospective date of obtaining registration as per Section 29, the petitioner would not be not eligible to apply for Revocation under Amnesty Scheme vide Notification No. 03/2023 dated 31/03/2023. The aforesaid show cause notice dated 11.05.2023 was not responded by the petitioner and therefore, respondent No. 2, vide order dated 24.05.2023, rejected the application seeking revocation of cancellation of registration on the ground that no reply was furnished to the show cause notice dated 11.05.2023.
9. Thereafter, the petitioner preferred another application on 30.05.2023 for revocation of cancellation of registration. In response to the said application, respondent No. 2 issued a show cause notice dated 05.06.2023 for rejection of application for revocation of cancellation of registration on the ground that the revocation application of the petitioner has already been rejected on 24.05 2023. The aforesaid show cause notice dated 05.06.2023 was not responded by the petitioner and therefore, respondent No. 2, vide order dated 01.07.2023, rejected the application seeking revocation of cancellation of registration on the ground that no reply was furnished to the show cause notice dated 05.06.2023
10. Being aggrieved by the order dated 01.07.2023 passed by the respondent No. 2 rejecting the application seeking revocation of cancellation of registration, the petitioner preferred an appeal for restoration of its registration on 14.07.2023 under Section 107 of the GST Acts before respondent No. 3 by
submitting the Form GST APL-01.
11. Respondent No. 3 called upon the report of the respondent No. 2 in response to the first appeal filed by the petitioner. The respondent No. 2 filed his report before the respondent No. 3 which was put to the petitioner vide Notice dated 12.09.2023 for his response. The petitioner responded to the same vide letter dated 10.10.2023 addressing all the issues raised by the respondent No. 2.
12. Respondent No. 3, rejected the appeal of the petitioner vide the impugned order dated 25.10.2023.
13. Being aggrieved by the impugned order dated 25.10.2023 passed by respondent no.3 Deputy State Tax Commissioner (Appeals) rejecting the First Appeal of the petitioner and order dated 14.12.2021 passed by respondent no.2-Assistant Commissioner, Ghatak, Morbi cancelling the registration of the petitioner and the order dated 24.05.2023 and order dated 01.07.2023 passed by respondent no.2 rejecting the application seeking revocation of cancellation of registration, the petitioner has preferred this petition.
14. Respondent no.3 rejected the appeal filed by the petitioner against the order of revocation of cancellation order on the ground that the application of revocation made by the petitioner was not within the extended period as per Notification No.03/2023 dated 31.03.2023 as the case of the petitioner was not falling within clause(b) and clause(c) of section 29 of the Gujarat Goods and Service Tax Act,2017 (For short “the GGST Act”) as the said notification would be applicable only to the persons who have not filed return for the financial year beyond three months or continuous period as may be prescribed whereas case of the petitioner was covered by clause(e) of section 29 of the GGST Act. However, the impugned show cause notice dated 30.11.2021 for cancellation of registration is issued without providing any details and the order of cancellation of registration dated 14.12.2021 also does not state any details for cancellation of registration and at the same time also impose penalty of Rs.29,41,224/- each under Central tax and State tax and penalty of Rs.14,28,840/-under the integrated tax without there being any notice of hearing to the petitioner.
15. The coordinate Bench of this Court in case of M/s. Aggrawal Dyeing & Printing v. State of Gujarat reported in (2022) 137 Taxmann.com 332 (Guj.) has issued the guidelines to respondent no.2 as under:
“18. Our final conclusion are as under:
18.1. Until the Department is able to develop and upload an appropriate software in the portal which would enable the Department to feed all the necessary information and material particulars in the show cause notice as well as in the final order of cancellation of registration that may be passed, the authority concerned shall issue an appropriate show cause notice containing all the necessary details and information in a physical form and forward the same to the dealer by RPAD. In the same manner, when it comes to passing the final order, the same shall also be passed in a physical form containing all the necessary information and particulars and shall be forwarded to the dealer by RPAD.
18.2 Over a period of time, we have noticed in many matters that the impugned order cancelling the registration of a dealer travels beyond the scope of the show cause notice. Many times, the dealer is taken by surprise when he gets to read in the order that the authority has relied upon some inspection report or spot visit report etc. If the authority wants to rely upon any particular piece of evidence then it owes a duty to first bring it to the notice of the dealer so that if the dealer has anything to say in that regard, he may do so. Even if the authority wants to rely on any documentary evidence, the dealer should be first put to the notice of such documentary evidence and only thereafter, it may be looked into.
18.3 The aforesaid may appear to be very trivial issues but, it assumes importance in reducing the unnecessary litigation. Our concern is that on account of procedural lapses, the High Court should not be flooded with writ applications. The procedural aspects should be looked into by the authority concerned very scrupulously and deligently. Why unnecessarily give any dealer a chance to make a complaint before this Court when it could have been easily avoided by the department.
19. In the result, all the writ applications deserve to be allowed solely on the ground of violation of principles of natural justice and, accordingly, the writ applications are allowed. We quash and set aside the respective show cause notices of all the writ applications, seeking cancellation of registration as well as the consequential respective impugned orders cancelling registration with liberty to the respondent No. 2 to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicants, and to pass appropriate speaking orders on merits. It is needless to mention that it shall be open for the writ applicants to respond to such notices by filing objections / reply with necessary documents, if relied upon. We clarify that we have not gone into merits of the case.”
16. The respondent authorities however rejected the application for revocation of cancellation contrary to the aforesaid directions issued by this Court. Respondent no.3 also rejected the appeal without referring to the details submitted by the petitioner.
17. In the present case, order of cancellation of registration is therefore, passed without assigning any reason by the respondent authority and penalty was imposed without any notice and opportunity of hearing to the petitioner and appeal filed by the petitioner under section 107 of the GST Act against the order of rejection of application for revocation of cancellation is also dismissed.
18. As the appellate authority has dismissed the appeal of the petitioner, respondent authority will not be able to exercise revisional power under section 108 of the GST Act. Therefore, the impugned order passed by the appellate authority as well as order of cancellation of registration are required to be quashed and set aside and accordingly, the matter is remanded back to the Assessing Officer at show cause notice stage. However, registration of the petitioner shall remain suspended till show cause notice is decided by the Assessing Officer as per the following directions:
1) The Assessing Officer shall provide detailed reasons for cancellation of registration of the petitioner within a period of two weeks from the date of receipt of a copy of this order.
2) The petitioner shall file reply upon receipt of the detailed reasons for issuance of show cause notice for cancellation of registration within a period of two weeks from the date of receipt of such reasons.
3) After receipt of reply from the petitioner, the respondent authority shall pass appropriate order in accordance with law after providing an opportunity of personal hearing to the petitioner and after considering the reply of the petitioner within a period of four weeks from the date of personal hearing.
4) The aforesaid timeline shall be followed by both the sides.
5) The petitioner shall cooperate with the respondent authorities for compliance with the aforesaid timeline for disposal of the show cause notice by the respondent authority.
19. In view of above directions, petition is partly allowed by quashing and setting aside the impugned orders passed by the appellate authority as well as order of cancellation of registration and the matter is remanded back to the respondent authority at the show cause notice stage. However, registration of the petitioner shall remain suspended till the show cause notice is disposed of as per the directions given by the Court.
20. It is clarified that this Court has not gone into the merits of the matter and respondent shall pass appropriate order in accordance with law after providing detailed reasons and opportunity of hearing to the petitioner.
21. Petition is disposed of accordingly.
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