N. Suveendran Vs State Tax Officer (Kerala High Court)
The Kerala High Court dismissed an appeal challenging the continuation of a GST registration after amendments to the registration were obtained using documents found to be fraudulent. The 3rd respondent had sought amendment of his tax registration based on documents indicating that his father and brother had permitted him to use certain premises for business. The State Tax Officer found the documents fraudulent because they bore a date after the father’s death and cancelled the original registration under Section 29(2)(e) of the CGST Act, 2017.
The First Appellate Authority allowed the respondent’s appeal, finding that the State Tax Officer lacked authority to cancel the registration or amendment in the circumstances. The Single Judge subsequently cancelled the amendments but permitted the respondent to seek fresh amendments according to law, while leaving the original registration intact.
Before the Division Bench, the appellant argued that the original registration should also have been cancelled under Section 29(2)(a) read with Section 29(2)(e), since the amendments were based on fraudulent documents. The respondent opposed the appeal and stated that civil proceedings concerning the property were pending.
The High Court held that Section 29(2) provides for cancellation where fraud, willful misstatement or suppression of facts occurred when the registration was initially obtained. Here, the alleged fraud occurred at the stage of applying for an amendment to an existing registration. The Court approved the Single Judge’s approach of cancelling the amendments while retaining the original registration.
The Court also noted that the amendment concerned only the business premises and not the business activity itself. The appeal was dismissed, with liberty to seek fresh amendments based on valid documents or orders.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The 3rd respondent applied for amendment of the tax registration of his business on the strength of Exts.P3 and P4, making it appear that he had been permitted by his father and brother to use the premises in question for carrying on his business activities.
2. The State Tax Officer, however, found Exts. P3 and P4 to be fraudulent, for the reason that it carried a date after the 3rd respondent’s father had expired. Consequently, Ext. P6 order was issued, cancelling the original registration itself, invoking Section 29(2) (e) of the Central Goods and Services Tax Act, 2017 (‘the CGST Act’ for short).
3. The matter was carried in appeal by the 3rd respondent before the First Appellate Authority, which issued Ext.P11 allowing it, holding that the State Tax Officer did not obtain the power to cancel registration, or even the amendment; and that the parties must invoke other remedies.
4. The appellant, thereupon, filed the writ petition before this Court, which was allowed in part by the learned Single Judge, cancelling the amendments to the registration, but permitting the 3rd respondent to apply for fresh amendments as per law.
5. The learned Single Judge, however, left the original registration intact, against which, the appellant is in appeal.
6. Sri. Joseph Markose, the learned Senior Counsel, instructed by Sri.Premjit Nagendran – appearing for the appellant, argued that, when the learned Single Judge found that the amendments, sought for by the 3rd respondent, were allowed based on fraudulent and illegally created documents, the natural corollary ought to have been cancellation of the registration itself, under Section 29(2)(a), read with Section 29(2)(e), of the “Act”. He contended that, the learned Single Judge, in having approved the original registration, even after the amendment was found to be untenable, has erred.
7. Sri. Mayinkutty Mathor, learned Senior counsel, instructed Smt. Parvathy – appearing for the 3rd respondent, in response, argued that the learned Single Judge has balanced the rival interests properly because, the only controversy is whether his client can use the premises covered by Exts.P3 and P4 for his business purposes; and, consequently, if the amendment he had obtained was wrong. He submitted that, though his client does not concede the position that Exts.P3 and P4 were obtained fraudulently, he does not wish to precipitate the same since, civil suits qua the property, are pending between the parties before the competent civil court. He explained that his client is confident of obtaining necessary orders from the said court; and hence that his right to seek fresh amendments of the registration as per law, has been correctly left open by the learned Single Judge. He prayed that, the impugned judgment be, hence, left undisturbed.
8. The learned Special Government Pleader – Sri. Sudheesh Kumar, submitted that the State Tax Officer had issued Ext.P6, finding that Exts.P3 and P4 were fraudulent documents; and that, in fact, the First Appellate Authority has also found so in Ext.P11. He conceded that the latter authority, nevertheless refused to grant approval to Ext.P6, only because it found that the cancellation of the registration was not authorised under Section 29(2) of the “Act” even in the case as presented before it. He left to this court to take any apposite decision.
9. Smt. Hemalatha – appearing for the 4th respondent, mother of the parties, submitted that it was her client who signed Exts.P3 and P4, in fullfilment of the desire of her deceased husband because, the 3rd respondent had been assisting him throughout in his business, when he was alive. She insisted that it is almost like a moral obligation, that the premises in question should go to the 3rd respondent, which was enabled through her client’s actions. She, prayed that the impugned judgment be, therefore, set aside; and the amendments to the registration in favour of the 3rd respondent be restored.
10. We feel it important to clarify that none of our observations herein, or those of the learned Single Judge, shall affect the civil proceedings between the parties and that the competent court shall proceed with the matter untrammeled and uninfluenced by it.
11. It is inevitable from the afore narrative that the sole question is whether the 3rd respondent was right in having obtained amendments to his Tax registration, relying upon Exts.P3 and P4; and, consequently, if, after the latter documents were found to be fraudulent, the registration itself could have been cancelled under Section 29(2) of the “Act”.
12. The afore provision has been extracted by the learned Single Judge in Paragraph 18 of the impugned judgment and we therefore refrain from doing so.
13. As per Section 29(2) of the “Act”, if a registered person contravenes any of the provisions of the “Act” or the Rules thereunder; or if it is found that such registration was obtained by fraud, willful misstatement or suppression of facts, the same can be cancelled. Prima facie, it is luculent that what Section 29 provides for is the cancellation of registration on account of fraud or suppression of facts committed at the time when it is initially obtained. Of course, Section 29(2) then provides that, if a person is to contravene any provision of the “Act”, the rigour of cancellation can apply.
14. In the case at hand, what is exhibited is a situation where the 3rd respondent used Exts.P3 and P4 – alleged to be fabricated documents – to obtain an amendment of the tax registration, which he had been enjoying earlier. The State Tax Officer found this to be sufficient to bring the case within the ambit of “contravening the provisions of the Act”, and thus invoked Section 29(2)(a) of the “Act”, to cancel the registration. The First Appellate Authority, however, found that such a power is not available; and, hence did not approve Ext.P6 order.
15. The learned Single Judge – in our view, correctly-proceeded on a median course, to obtain substantial justice for both sides, by cancelling the amendments made to the original registration, but leaving the latter intact; with liberty reserved to all parties to invoke remedies as may be available to them, including seeking fresh amendment of the registration.
16. The course adopted in the impugned judgment finds our approval because, prima facie, Section 29 of the “Act” provides for cancellation of the registration, if fraud or such vitiated circumstances are noticed at the time of registration. In contra-distinction, the alleged fraud noticed in this case is at the stage of the application to amend the registration.
17. That apart, the cancellation of the registration of the respondent would bear no benefit to the appellant, except as a matter of retribution; and this is perhaps why, the learned Single Judge did not accede to such plea.
18. Pertinently, the impugned judgment finds Exts.P3 and P4 to be untenable, as also the amendments based on it. It, however, allows the registration to continue, which obviously would be dependent upon the final decisions in the civil cases between the parties.
19. Furthermore, the amendment in question concededly relates only to the premises of the business concern, and does not touch upon the business activity per se. If the said premises are ultimately found to vest in one party by the competent civil court, the necessary consequences will have to follow. In such perspective, reserving liberty to the 3rd respondent to seek fresh amendments in future, would not cause any prejudice to the appellant either, any such amendment will depend upon valid documents / order being produced and proved.
20. In such conspectus, we find no reason to intervene; and, consequently, dismiss this appeal.
