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Case Law Details

Case Name : Euro PVC Fabric Vs Principal Commissioner of Goods and Services Tax (Delhi High Court)
Appeal Number : W.P.(C) 349/2024
Date of Judgement/Order : 27/02/2024
Related Assessment Year :

Euro PVC Fabric Vs Principal Commissioner of Goods and Services Tax (Delhi High Court)

Introduction: In a significant judgment that underscores the importance of due process and careful consideration by tax authorities, the Delhi High Court addressed the case of Euro PVC Fabric Vs Principal Commissioner of Goods and Services Tax. This case centered on the cancellation of the petitioner’s GST registration by the proper officer, which the court found to be carried out without adequate examination or reasoning. The judgment sheds light on the need for a systematic and thoughtful approach by GST authorities in making decisions that significantly impact businesses, particularly small operators like the petitioner, who was described as an electrician undertaking minor jobs.

Detailed Analysis: The crux of the dispute arose from an order dated 18.01.2021, canceling the petitioner’s GST registration effective from 31.12.2020, on the grounds of non-filing of returns for six consecutive months. Notably, the show cause notice lacked crucial details such as the date, time, or venue for a hearing, and the subsequent cancellation order referred to a non-existent reply from the petitioner. Moreover, the order failed to articulate any concrete reason for the cancellation, citing only a placeholder without further explanation.

The Delhi High Court’s examination revealed several critical flaws in the administrative process leading to the registration’s cancellation. Firstly, the reference to a reply that was never filed indicated a significant oversight or miscommunication within the GST system. Secondly, the absence of any articulated reason for the cancellation in the order itself pointed to a lack of substantive evaluation of the case’s merits. These factors collectively led the court to conclude that the cancellation order demonstrated an ex facie non-application of mind by the concerned Superintendent.

Conclusion: This judgment by the Delhi High Court in the case of Euro PVC Fabric Vs Principal Commissioner of Goods and Services Tax marks a crucial precedent emphasizing the necessity for GST authorities to exercise diligence, fairness, and transparency in their administrative actions. By setting aside the cancellation order and restoring the petitioner’s GST registration, the court underscored the principle that system-generated decisions must still reflect thoughtful consideration and adherence to legal standards. This ruling serves as a reminder of the judiciary’s role in safeguarding the procedural rights of taxpayers and ensuring that administrative decisions are founded on a thorough examination of each case’s facts and circumstances. For businesses and tax practitioners alike, this case highlights the importance of maintaining accurate records and being proactive in compliance to avoid similar issues.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Petitioner impugns order dated 18.01.2021, whereby the GST registration of the petitioner has been cancelled with effect from 31.12.2020. By the show cause notice dated 29.04.2020, petitioner was called upon to show cause as to why registration be not cancelled for the reason that “Any taxpayer other than composition taxpayer has not filed returns for a continuous period of six months.”.

2. Petitioner was required to furnish a reply within the stipulated time and it was stipulated that if he will fail to reply or to appear for personal hearing on the appointed date and time, the case would be decided ex parte.

3. A perusal of the show cause notice shows that the same did not contain any date or time or venue where the petitioner had to appear in response to the show cause notice.

4. Further, subsequent thereto, the impugned order dated 18.01.2021 has been passed, which records as under:-

“This has reference to your reply dated 09/05/2020 in response to the notice to show cause dated 29/04/2020

Whereas the undersigned has examined your reply and submissions made at the time of hearing, and is of the opinion that your registration is liable to be cancelled for following reason(s).

1..

The effective date of cancellation of your registration is 3 1/12/2020”

5. It is noticed that order for cancellation refers to a reply filed by the petitioner dated 09.05.2020 in response to the show cause notice dated 29.04.2020.

6. It is an admitted position that no reply to the show cause notice was filed. Surprisingly, the order of cancellation refers to a reply when no reply has been filed. Further, the order of cancellation states that the Superintendent who passed the order was of the opinion that registration is liable to be cancelled for the following reasons. In the body of the order, except for mentioning the numerical “1 .”, there is nothing else stated to amount to a reason for cancellation. Further, we note that the order records that the amount payable by the petitioner based on the computation is shown as “0.0” i.e. Nil.

7. Clearly, the said order dated 18.10.2021 is not sustainable for the reason that the order clearly demonstrates ex facie non-application of mind by the concerned Superintendent, who passed the order. On the one hand, the order refers to a reply, which was never filed and on the other, it does not give any reason for cancellation.

8. The stand of the respondents is that order is a mere system generated order. This stand of the respondents further compounds the issue for the reason that system generated order clearly establishes the non-application of mind by the proper officer.

9. In view of the aforesaid, this order cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. The petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017 along with the payment of requisite delay charges.

10. The petition is accordingly disposed of in the above terms.

11. We find no merit in the objection by learned counsel for respondents that there is delay in filing the subject petition and the statutory remedies of revocation has not been availed of by the petitioner. First and foremost, there is no limitation for filing a petition under Article 226 of the Constitution before this Court. Clearly, when this Court noticed a complete non-application of mind on the part of the proper officer, no purpose would be served in relegating an individual to filing the revocation petition. Repeatedly, this Court is flooded with petitions where there are similar system generated order which ex facie demonstrate non-application of mind. Further, the petitioner is stated to be an electrician doing petty jobs.

12. Petition is accordingly allowed in the above terms.

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