GST registration cannot be suspended for more than 2 months on the basis of SCN lacking any reason or fact

Shakti Shiva Magnets Private Limited Vs Assistant Commissioner & Ors. (Delhi High Court)

GST registration cannot be suspended for more than 2 months on the basis of SCN lacking any reason or fact

The Hon’ble Delhi High Court in Shakti Shiva Magnets Private Limited v. Assistant Commissioner & Ors [W.P.(C) 1559/2022 dated January 31, 2022] quashed the Show Cause Notice (’SCN) issued by the Revenue Department suspending GST registration of the assessee and directed to reissue a fresh SCN with all the relevant facts and reasons within a week’s time regarding. Further, directed the Revenue Department to restore the assessee’s GST registration and issue a practice direction so that in future, if any SCN for cancellation of GST registration is issued, the same is not bereft of any material particulars or reasons.

Facts:

Shakti Shiva Magnets Private Limited (the Petitioner) has filed this petition against the SCN issued dated November 11, 2021 (“the impugned SCN”) by Revenue Department (“the Respondent”) due to which the Petitioner’s registration was suspended for more than 2 months with no sufficient explanation or reason or fact.

The Petitioner contended that as per Rule 21A of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) that describes the conditions needed to be fulfilled for suspending a registration and Rule 22(3) of the CGST Rules wherein it is provided that an assessee’s registration can be suspended only for 30 days and the cancellation proceeding has to be concluded within the same period.

Further, the Respondent prayed for 3 days’ time to issue a fresh detailed SCN to the Petitioner and for fifteen days’ time to decide the same.

Issue:

Whether the Respondent can suspend the registration of the Petitioner with no sufficient explanation, reason or fact under the CGST Rules?

Held:

The Hon’ble Delhi High Court in W.P.(C) 1559/2022 dated January 31, 2022 held as under:

• Observed that the impugned SCN contains no fact or reasons and is not supported by any document based on which the Petitioner’s registration could be suspended.
• Quashed the impugned SCN.
• Directed the Respondent to restore the Petitioner’s GST registration. However, allowed the Respondent to issue a fresh SCN mentioning all the relevant facts and reasons within a week.
• Further directed the Respondent to issue a practice direction so that in future, if any SCN for cancellation of GST registration is issued, the same is not bereft of any material particulars or reasons.

Relevant Provisions:

Rule 21A of the CGST Rules:

“Suspension of registration

(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.”

Rule 22(3) of the CGST Rules:

“Cancellation of registration

Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted under sub-rule (1) of  rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule (1) or under sub-rule (2A) of rule 21A, cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of section 29.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

The matter has been heard by way of video conferencing.

C.M.No.4459/2022

Exemption allowed, subject to all just exceptions.

Accordingly, the application stands disposed of.

W.P.(C) No.1559/2022

In pursuance to the order dated 27 ^th January, 2022, Mr.Ankur Garg, Commissioner, Delhi, GST has joined the proceedings by way of an online video link.

Mr.Ankur Garg admits that the impugned show-cause notice dated 11^th November, 2021 contains no fact or reason. He also agrees that the impugned show-cause notice is not supported by any document/form on the basis of which the petitioner’s GST registration has been suspended. He prays for three days’ time to issue a fresh detailed show-cause notice to the petitioner and for fifteen days’ time to decide the same.

However, learned counsel for the petitioner has drawn this Court’s attention to Rule 21A as well as Rule 22(3) of the Delhi GST Rules, 2017, wherein it is provided that an assessee’s registration can be suspended only for thirty days and the cancellation proceeding has to be concluded within thirty days.

Since in the present case, petitioner’s registration has been lying suspended for more than two months on the basis of a show cause notice which is bereft of any reason or fact, this Court quashes the impugned show cause notice dated 11^th November, 2021 and directs the respondents to restore the petitioner’s registration forthwith. However, the respondents are permitted to issue a fresh show-cause notice mentioning all the relevant facts and reasons within a week. The same shall be responded to by the petitioner within a period of seven working days from the date of the service of such notice (Rule 22, DGST). The respondents shall thereafter decide the same in accordance with law within two weeks.

The Commissioner, Delhi, GST, is also directed to issue a practice direction so that in future, if any show-cause notice for cancellation of GST registration is issued, the same is not bereft of any material particulars or reasons.

With the aforesaid directions, the present writ petition stands disposed of.

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(Author can be reached at info@a2ztaxcorp.com)