Case Law Details
Umiya Industries Vs Superintendent of Goods And Services Tax (Gujarat High Court)
Conclusion: While issuing a cryptic show cause notice, the authorities had violated the principles of natural justice. As from the impugned order as well as the show cause notice, the reasons for cancellation of GST registration were not decipherable therefrom, therefore, the show cause notice and the impugned order were quashed and set aside.
Held: Assessee submitted that show cause notice issued to assessee seeking to cancel the registration of assessee was cryptic in as much as though the show cause notice mentioned that the registration had been obtained by means of fraud, willful mis-statement and suppression of facts, no details were furnished to assessee. Consequently, the order of cancellation also was bad. Respondent held that panchnama was carried out on 02.06.2022 and it was observed that the gate was closed and no business activity was carried out by assessee since long. Deputy Commissioner (Anti Evasion), CGST, Rajkot directed the Assistant Commissioner, CGST Division-II, Rajkot and accordingly, the Assistant Commissioner directed the Superintendent, CGST, Range Shapar, Rajkot to cancel the GST registration of assessee firm under section 29(2)(e) of the CGST Act,2017. It was held that by issuing a cryptic show cause notice, the authorities had violated the principles of natural justice. From the impugned order as well as the show cause notice, the reasons for cancellation were not decipherable therefrom. Therefore, the show cause notice and the impugned order were quashed and set aside. The show cause notice as well as the order cancelling the registration were quashed and set aside with a liberty reserved to the Respondent to issue a fresh notice with particulars of reasons incorporated with details, and thereafter, to provide reasonable opportunity of hearing to the writ petitioner and to pass appropriate speaking order on merits.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Rule returnable forthwith. Mr. Priyank Lodha, learned Senior Standing Counsel waives service of notice of rule on behalf of the respondent. With consent of the learned advocates appearing for the respective parties, the matter is taken up for final hearing today.
2. Priyank Lodha, learned Senior Standing Counsel files affidavit-in-reply to the petition. Short issue in this petition is challenge to the show cause notice and subsequentorder cancelling registration of the petitioner.
3. Ms. VaibhaviParikh, learned counsel appearing for the petitioner would submit that show cause notice issued to the petitioner seeking to cancel the registration of the petitioner, is cryptic in as much as though the show cause notice mentions that the registration has been obtained by means of fraud, willful mis-statement and suppression of facts, no details were furnished to the petitioner. Consequently, the order of cancellation also is bad.
4. Vaibhavi Parikh, learned counsel appearing for the petitioner, submitted that the Show Cause Notice as well as the impugned order are vague, inasmuch as, no reasons have been assigned for cancellation of registration. She would rely on the decision rendered by this Court in Special Civil Application No.13230 of 2023, wherein this Court relying on the decision in the case of Aggarwal Dyeing and Printing Works vs. State of Gujarat., reported in [2022] 137 taxmann.com 332 (Gujarat), has quashed and set aside the show cause notice and subsequent order passed therein.
5. Mr. Priyank Lodha, learned Senior Standing Counsel appearing for the respondent would submit that, admittedly, as a result of the registration having been found fraudulent and having been obtained by means of fraud, willful mis-statement and suppression of facts, was rightly cancelled.
5.1 Mr. Lodha, learned Senior Standing Counsel would rely on the contents of the affidavit-in-reply filed on behalf of the respondent and would submit that Commercial Tax Officer, Ghatak 94, Gondal made spot visit of the premises of the petitioner and found that the premises was closed. The officer has taken photograph and videography of the premises and found that even the board is not there on the premises. The State Department therefore sent an email on 11.05.2023 to the CGST Division-II, Rajkot along with spot verification report of the Commercial Tax Officer. Panchnama is annexed to the affidavit-in-reply.
5.2 Relying on paragraph nos. 9 to 12 of affidavit-in- reply, it was submission of learned counsel for the respondent that panchnama was carried out on 02.06.2022 and it was observed that the gate was closed and no business activity was carried out by the petitioner since long.
5.3 The Deputy Commissioner (Anti Evasion), CGST, Rajkot on 07.06.2022 directed the Assistant Commissioner, CGST Division-II, Rajkot and accordingly, the Assistant Commissioner directed the Superintendent, CGST, Range Shapar, Rajkot to cancel the GST registration of the petitioner firm under section 29(2)(e) of the CGST Act,2017.
6. Having considered the submissions made by the learned counsels appearing for the respective parties, it isnot in dispute that the issue is covered by the decision in the case of Aggarwal Dyeing and Printing Works (supra), which has set out procedure for cancellation of registration. Paragraphs 9.2 to 11 of the decision, reads as under:
“9.2 The procedure for cancellation of registration can be summarized as under:
i. A person already registered under any of the existing laws (Central excise, Service tax, VAT etc.), but who now is not liable to be registered under the GST Act has to submit an application electronically by 31st December 2017, in FORM GST REG-29 at the common portal for the cancellation of registration granted to him.
The Superintendent of Central Tax Cancellation of Registration in GST 12 GST FLYERS shall, after conducting such enquiry as deemed fit, cancel the said registration.
ii. The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under Central Goods and Services Tax Act.
iii. In the event, the Superintendent of Central Tax has reasons to believe that the registration of a person is liable to be cancelled, a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled; will be issued.
iv. The reply to the show cause notice issued has to be furnished by the registered person in FORM REG– 18 within a period of seven working days. iv. In case the reply to the show cause notice is found to be satisfactory, the Superintendent of Central Tax will drop the proceedings and pass an order in FORM GST REG –20.
v. However, when the person who has submittedan application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the Superintendent of Central Tax will issue an order in FORM GST REG-19, within a period of thirty days from the date of application or, as the case may be, the date of the reply to the show cause issued, 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.
vi. The registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher.
vii. In case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
viii. The cancellation of registration shall not affect the liability of the person to pay tax and other dues for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of
9.3 At the same time, the statute also provides for revocation of cancellation:
i. When the registration has been cancelled by the Proper Ofiicer (Superintendent of Central Tax) on his own motion and not on the basis of an application ,then the registered person, whose registration has been cancelled, can submit an application for revocation of cancellation of registration, in FORM GST REG-21, to the Proper Ofiicer (Assistant or Deputy Commissioners of Central Tax), within a period of thirty days from the date of the service of the order of cancellation of registration at the common portal, either directly or through a Facilitation Centre notified by the Commissioner:
ii. However, if the registration has been cancelled for failure to furnish returns, application for revocation shall be filed, only after such returns are furnished and any amount due as tax, in terms of such returns, has been paid along with any amount payable towards interest, penalty and late fee in respect of the said returns.
iii. On examination of the application if the Proper Ofiicer (Assistant or Deputy Commissioners of Central Tax) is satisfied, for reasons to be recorded in writing, that there are sufiicient grounds for revocation of cancellation of registration, then he shall revoke the cancellation of registration by an order in FORM GST REG-22 within a period of thirty days from the date of the receipt of the application and communicate the same to the applicant.
iv. However, if on examination of the application for revocation, if the Proper Ofiicer (Assistant or Deputy Commissioners of Central Tax) is not satisfied then he will issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why the application submitted for revocation should not be rejected and the applicant has to furnish the reply within a period of seven working days from the date of the service of the notice in FORM GST
v. Upon receipt of the information or clarification in FORM GST REG-24, the Proper Ofiicer (Assistant or Deputy Commissioners of Central Tax) shall dispose of the application within a period of thirty days from the date of the receipt of such information or clarification from the applicant. In case the information or clarification provided is satisfactory, the Proper Officer (Assistant or Deputy Commissioners of Central Tax) shall dispose the application as per para (iii) In case it is not satisfactory the applicant- Cancellation of Registration in GST 16 GST FLYERS will be mandatorily given an opportunity of being heard, after which the Proper Officer (Assistant or Deputy Commissioners of Central Tax) after recording the reasons in writing may by an order in FORM GST REG- 05, reject the application for revocation of cancellation of registration and communicate the same to the applicant.
vi. The revocation of cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a revocation of cancellation of registration under Central Goods and Services Tax Act.
10. Thus, upon appreciation of the scheme of Act, where specific forms have been prescribed at each stage right from registration, cancellation and revocation of cancellation of registration, the same are to be strictly adhered too. At the same time, it is equally important that the Proper Ofiicer empowered under the said Act adheres to the principles of natural justice.
11. At the outset, we notice that it is settled legal position of law that reasons are heart and soul of the order and non communication of same itself amounts to denial of reasonable opportunity of hearing, resulting in miscarriage of justice. This Court is bound by the said judgments hereinafter referred to. The necessity of giving reason by a body or authority in support of its decision came for consideration before the Supreme Court in several cases. Initially, the Supreme Court recognized a sort of demarcation between administrative orders and quasi-judicial orders but with the passage of time the distinction between the two got blurred and thinned out and virtually reached a vanishing point in the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1970) 1 SCR 45. The Hon’ble Supreme Court vide judgments in the cases of Ravi Yashwant Bhoir v. District Collector Raigad, (2012) 4 SCC 407, Sant Lal Gupta v. Modern Cooperative Group Housing Society Limited, (2010) 13 SCC 336; Kranti Associates Private Limited v. Masood Ahmed Khan, (2010) 9 SCC 496; Abdul Ghafiar v. State of Bihar, (2008) 3 SCC 258, has expanded the horizon of natural justice and reasons have been treated part of the natural justice. It has gone to the extent in holding that reasons are heart and soul of the order. The absence of reasons renders an order indefensible/unsustainable particularly when it is subject to appeal/revision. It is to be noted that in the case of Kranti Associates v. Masood Ahmed Khan, (2010) 9 SCC 496, the Hon’ble Supreme Court after considering various judgments formulated certain principles which are set out below:
“a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
b. A quasi-judicial authority must record reasons in support of its conclusions.
c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.
d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous
f. Reasons have virtually become as indispensable component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
g. Reasons facilitate the process of judicial review by superior Courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.
i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial accountability and transparency.
k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making processthen it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or ‘rubber-stamp reasons’ is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny (See David Shapiro in Defence of Judicial Candor (1987) 100 Harvard Law Review 731-737);.
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553 at 562 para 29 and Anya v. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decision.”
o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “Due Process”.
Thus, the position of law that emerges from the decisions mentioned above, is that assignment of reasons is imperative in nature and the speaking order doctrine mandates assigning the reason which is the heart and soul of the decision and said reasons must be the result of independent re- appreciation of evidence adduced and documents produced in the case.”
7. The Court had held that by issuing a cryptic show cause notice, the authorities had violated the principles of natural justice. From the impugned order as well as the show cause notice, the reasons for cancellation are not decipherable therefrom.
8. On the aforesaid grounds, the show cause notice and the impugned order are quashed and set aside. The petition is allowed solely on the ground of violation of principles of natural justice. The show cause notice as well as the order cancelling the registration are quashed and set aside with a liberty reserved to the respondent to issue a fresh notice with particulars of reasons incorporated with details, and thereafter, to provide reasonable opportunity of hearing to the writ petitioner and to pass appropriate speaking order on merits.
It is needless to mention that it shall be open for the petitioner to respond to such notice by filing objections / reply with necessary documents, if relied upon. We clarify that we have not gone into merits of the case. Rule is made absolute to the above extent.
Direct service is permitted.
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