Case Law Details
Muhammad Salmanul Faris k Vs Superintendent, CGST & Central Excise (Kerala High Court)
The Kerala High Court recently delivered a judgment in the case of “Muhammad Salmanul Faris k Vs Superintendent, CGST & Central Excise.” The case revolved around the cancellation of the petitioner’s GST registration by the Directorate General of Goods and Services Tax Intelligence (DGGI) and the subsequent actions taken by the Superintendent of Central Tax (CGST). This article delves into the details of the case and the court’s decision.
Background of the Case: The petitioner challenged the cancellation of their GST registration (Ext.P6 Order) by the DGGI, Kochi Zonal Unit. The primary reason for the cancellation was the issuance of invoices/bills to other dealers without supplying goods or providing services, which was deemed a violation of the GST Act and Rules. Intelligence inputs also indicated potential involvement in fake invoicing.
Notice Issuance: The petitioner received a show cause notice (Ext.P2) on 15.03.2023, which was followed by a reply (Ext.P3) on 24.03.2023. Surprisingly, the notice did not specify where the petitioner should appear for a personal hearing. Subsequently, Ext.P4 canceled the show cause notice dated 15.03.2023. Another show cause notice (Ext.P5) was issued on 28.03.2023, but the petitioner did not respond.
Cancellation of GST Registration: A communication dated 12.04.2023 mentioned the involvement of the petitioner in availing fake input tax credit. The Deputy Director, DGGI, Kochi Zonal Unit, requested the Range Officer, Ottapalam, to cancel the petitioner’s GST registration after a personal hearing, which the petitioner failed to attend. Ext.P6, the impugned order, canceled the GST registration.
Petitioner’s Argument: The petitioner’s counsel contended that the DGGI, having already directed the cancellation of GST registration, the competent authority could not have made a contrary decision. Moreover, the petitioner argued that the direction for cancellation lacked due process and jurisdiction, rendering the impugned order unlawful.
Respondent’s Defense: The respondent argued that a significant cartel was operating for fake input tax credit. Intelligence inputs and investigations confirmed the cartel’s existence. Show cause notices were issued, but the petitioner did not provide any documents or utilize the opportunity for a hearing.
Court’s Decision: The court noted that the DGGI had already decided on the cancellation of the petitioner’s GST registration. It opined that the competent authority’s role was to formalize the process, and it should not have made an independent decision. Consequently, the court set aside the impugned order but did not revive it for one month.
Fresh Proceedings: The court directed the petitioner to appear before the Superintendent of Central Tax, Ottapalam Range, on 18.09.2023, with relevant records to dispute the allegations in the show cause notice. The petitioner should be provided with adverse materials collected against them for review. A fresh order should be passed within three weeks, considering the evidence and hearing. The petitioner may seek appropriate legal recourse if the registration is canceled.
Independence of Decision: It was emphasized that the Superintendent of Central Tax should make an independent decision without influence from the DGGI’s direction.
Conclusion: The Kerala High Court’s judgment highlights the importance of due process in GST registration cancellation cases. It asserts that the competent authority should not independently decide but rather formalize the direction issued by higher authorities. This case serves as a reminder of the need for a fair and unbiased assessment of such matters.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. Heard Sri. Aswin Gopakumar, Learned counsel for the petitioner and Sri. P.T. Dinesh, Learned Counsel for the respondent. The present Writ Petition has been filed by the petitioner impugning Ext.P6 Order whereby the petitioner’s GST registration has been cancelled. Primarily on the ground that the petitioner has issued Invoices/Bills to other dealers without supplying goods or providing any services in violation of the GST Act and Rules and such violation of raising Invoices and Bills have made use by the purchasing dealers for availment of the declaration of the input tax credit or refund of tax. It appears that some intelligence input were received for fake invoicing. The DGGI, Kochi Zonal Unit, in view of the intelligence report, vide letter dated 11.03.2023 directed the Range Officer, Ottappalam Range to cancel the petitioner’s GST Registration, under Section 29 (2) (a) read with Rule 21 (e) of the CGST Act/Rules, 2017.
2. The first show cause notice Ext.P2 was issued to the petitioner on 15.03.2023. Though the reasons for issuing the notice was written, but it was no where mentioned that where the petitioner has to appear for personal hearing in pursuance to the said notice. Petitioner filed Ext.P3 reply to the said notice on 24.03.2023. Considering the said reply to the show cause notice submitted by the petitioner, Ext.P4 Order came to be passed and the said show cause notice dated 15.03.2023 was cancelled vide Order dated 27.03.2023. Ext.P5 Second Show cause notice almost in identical lines was issued on 28.03.2023. The petitioner did not submit reply to the show cause notice dated 28.03.2023. Another communication dated 12.04.2023 was issued to the petitioner mentioning that with reference to the investigation launched by DGGI, Kochi Zonal Unit into a fake invoicing cartel, indicates that the petitioner was involved in availing fake input tax credit from multiple firms. Therefore, the Deputy Director, DGGI, Kochi Zonal Unit has requested the Range Officer, Ottapalam to cancel the GST registration of the petitioner and the petitioner was given a personal hearing on 27.03.2023. However, it appears that the petitioner did not appear on the said date and new date was fixed on 19.04.2023 at 11.45 am at the Central Revenue Building, Mettupalayam Street, Palakkad. The petitioner did not appear for the said hearing on 19.04.2023 and therefore, Ext.P6 impugned order for cancellation of the GST registration of the petitioner was passed.
3. The learned counsel for the petitioner submits that when the DGGI Cochin Unit has already taken a decision and directed for cancellation of the GST registration of the petitioner, the competent authority could not have taken a decision contrary to the said direction issued by the higher authority. It is further submitted that the said direction for cancellation of the GST registration of the petitioner was without following the due process of the law prescribed under the statutes and rules there under. It is wholly without jurisdiction and against the provision of the law and, therefore, the impugned order is liable to be set aside.
4. The learned counsel for the respondents submits that a large cartel is operating for availing fake input tax credit. There has been intelligence input and investigation in respect of the cartel and after conducting the investigation, it was confirmed that the cartel is operating for availing the fake input tax credit, and, therefore, DGGI, Kochi Zonal Unit directed to cancel the GST registration certificate of the petitioner. He further submits that the issuance of Show cause notice and opportunity of hearing to the petitioner was granted. But the petitioner did not make use of the opportunity of hearing and not produced any documents and therefore, the impugned order has been passed.
5. Considering the aforesaid submissions, there is no denial of fact that the DGGI, Kochi Zonal Unit has already taken the decision for cancelling the GST registration of the petitioner. In my view, the competent authority was only required to form the formalities and the authority concerned or the competent authority could not have taken an independent decision. Therefore, the impugned order is set aside. However, the said order is not revived further for a period of one month.
6. The petitioner is directed to appear before the Superintendent of Central Tax & Central Excise, Ottapalam Range, Mettupalayam Street, Palakkad on 18.09.2023 with relevant records in his possession to dispute the allegation contained in the Show cause notice. The adverse materials collected against the petitioner must be given to him for adverting the same by him. After taking the evidence from the petitioner and providing an opportunity of hearing to him, a fresh order may be passed in accordance with law within a period of three weeks from 18.09.2023. If the show cause is cancelled, the petitioner would be entitled for restoration of the GST registration certificate. However, if the authority takes a decision to cancel the GST registration of the petitioner, he may take recourse to appropriate proceedings as available under law.
7. It is made clear that the Superintendent of Central Tax should take an independent decision without being influenced by the direction of the DGGI, Kochi Zonal Unit.
8. With the aforesaid directions, the writ petition stands disposed of.
