Vague SCN for Cancellation of GST Registration & subsequent cancellation not sustainable

DBS Tradelink and Advisors Pvt. Ltd. Vs State of Maharashtra (Bombay High Court)

Vague SCN cannot be relied upon for cancellation of GST registration

The Hon’ble Bombay High Court in DBS Tradelink and advisors Pvt. ltd. v.  The state of Maharashtra and another [Writ petition no.8474 of 2022 dated July 20, 2022] directed the assessing authority to restore the registration of the assessee on the very same day of this judgment.

Facts:

An incomprehensible show cause notice dated April 21, 2022 (“the SCN”) was issued to DBS Tradelink and advisors Pvt. ltd (“the Petitioner”) stating that the Petitioner’s registration is liable to be cancelled in case the registration has been obtained by means of fraud, willful misstatement or suppression of facts. Further, it was nowhere mentioned in the SCN that the Petitioner has obtained registration by fraud or willful misstatement or suppression of facts.

Moreover, the signature mentioned in the SCN is a digital signature that was not verified.

After the reply of the SCN, an order dated July 5, 2022 (“the Impugned order”) was passed by the assessing authority (“the Respondent”) stating that no reply to the SCN has been submitted and also stating that the reply of the SCN has been examined.

The Petitioner filed the writ petition for quashing both the documents that are the SCN and the Impugned order that was issued without the application of mind. Also, the Petitioner prayed for the restoration of registration.

Issue:

Whether or not the vague SCN in digital form can be a valid document for cancellation of registration?

Held:

The Hon’ble Bombay High Court in Writ petition no.8474 of 2022 dated July 20, 2022, held as under:

• Quashed and set aside the Impugned order as well as the SCN.
• Further, held that the Respondents are free to proceed further in accordance with the law, but not in a digital form until the problem is resolved. The Court also stated that the Respondents shall issue notices and pass orders in physical form unless the network problem is resolved.
• Lastly, the Court disposed off the petition directing that the Respondent to restore the Petitioner’s registration forthwith, in any case before 4.30 p.m. on the day of this judgment.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Petitioner has sought the following prayers:-

(a) this Hon’ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner’s case and after going into the validity and legality thereof be pleased to quash and set aside (i) the Impugned Order dated 05.07.2022 passed by the Respondent No.2 (Exhibit “A”) and (ii) the Impugned Show Cause Notice dated 21.04.2022 issued by the Respondent No.2 (Exhibit “B”);

(b) this Hon’ble Court be pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing the Respondents to forthwith restore the Petitioner’s registration no. 27AAECD7278GIZD under the Act.”

2. Exhibit B is a copy of the show cause notice which is incomprehensible. The same is scanned and reproduced below:-

3. We do not know how a person is expected to respond to such a show cause notice. It says “it appears that registration is liable to be cancelled for the following reason: in case registration has been obtained by means of fraud, willful misstatement or suppression of facts.” The show cause notice does not even allege that petitioner has obtained registration by fraud or willful misstatement or suppression of facts. There is a digital signature appended in the said document which says signature is not verified. Therefore, we have to take it to be an unsigned document. We fail to understand how it can be an official document.

4. The impugned order dated 21^st April, 2022 also is incomprehensible.

The same is as under :-

5. It says this has reference to reply dated 3^rd May, 2022 in response to the show cause notice dated 21^st April, 2022. In the next line it says whereas no reply to notice to show cause has been submitted and in the third line it says whereas the undersigned has examined your reply. It ends with the determination of amount payable pursuant to cancellation as zero.

6. When we observed that both documents indicate non-application of mind, Ms. Vyas states that the officer whose name appears, Kalpana Anil Patil is present in court and she has been informed that these were system generated documents. Ms. Vyas states that even Commissioner had personally informed her that these are system generated documents and the Commissioner has accelerated the problem to the central authority in Delhi. In fact, we would have expected respondents to show what the Hon’ble Gujarat High Court in the case of Aggarwal Dyeing and Printing Works Vs. State of Gujarat and ors.¹, had directed that the department shall issue notices and pass order in physical form containing all the necessary information and particulars. This judgment of Gujarat High Court has been delivered on 24^th February, 2022. Still respondents including GST Network (GSTN) have not set their house in order.

7. In the circumstances, we have no option but to quash and set aside the impugned order. Even the show cause notice is hereby quashed and set aside. It is open to respondents to proceed further in accordance with law, but not in a digital form until the problem is resolved. Respondents shall issue notices and pass order in physical form unless the network problem is resolved.

8. Paragraph 18 of the petition reads as under :-

“The Petitioner submits that the remedy by way of revocation under Section 30 of the CGST Act is neither alternate nor efficacious remedy against the impugned order dated 05.07.2022 passed by the Respondent No.2. It is submitted the impugned order has been passed in breach of principal of natural justice in as much as the letter relied upon by Respondent No.2 were never provided to the Petitioner. In view of peculiar facts of the present case, the Petitioner is entitled to invoke the jurisdiction of this Hon’ble Court under Article 226 of the Constitution of India. The impact of the impugned order is far reaching and the Petitioner is unable to carry on its business. The Petitioner submits that the reliefs prayed for herein if granted, would afford to them complete relief and justice to the Petitioner.”

9. The respondents shall restore petitioner’s registration forthwith, in any case before 4.30 p.m. today.

10. Petition disposed accordingly.

Notes:-

1  2022 (4) TMI 864

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