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Case Law Details

Case Name : S.R. Steel Vs State of U.P. And 2 Others (Allahabad High Court)
Appeal Number : Writ Tax No. 860 of 2021
Date of Judgement/Order : 25/10/2021
Related Assessment Year :

S.R. Steel Vs State of U.P. (Allahabad High Court)

In the peculiar facts of the present case as have been noted above, we lift the bar of alternative remedy as we find that the petitioner’s GST registration was cancelled without issuance of any prior show cause notice. Also, the delay is largely on account of the conduct of the State respondents or conduct attributable to the State respondents as they alone were responsible to update the information on the GST Portal. That not done, the petitioner/citizen may not be relegated to the forum of alternative remedy as his valuable right to do business has been curtailed in violation of principle of natural justice.

Accordingly, the order cancelling the petitioner’s registration is set aside. The matter is remitted to respondent no.3 to pass a fresh order, in accordance with law.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

Heard Sri Praveen Kumar, learned counsel for the petitioner and Sri Apurva Hajela, learned Standing Counsel for the State.

Challenge has been raised to the order dated 15.7.2020 passed by respondent no.3, Deputy Commissioner, Commercial Tax, Sector-17, Ghaziabad titled “order for cancellation of registration”.

A copy of the instructions received by the learned Standing Counsel have been marked as X and placed on record.

The petitioner states, he was granted registration under the UPGST Act, 2017. Initially a show cause notice proposing to cancel the petitioner’s registration was uploaded on the GST Portal. It is dated 5.4.2018. That notice was wholly unintelligible, inasmuch as substance of the notice/ reasons appeared in garbage language/symbols. This fact is admitted to the State. According to the learned Standing Counsel, realizing the above mistake, the respondent authorities issued a physical notice to the petitioner on the same date. Its copy has been produced along with the written instructions and has been supplied to learned counsel for the petitioner. Pursuant thereto the respondent further claims to have passed an order dated 30.6.2018. A copy of the same has also been annexed to the written instructions produced by the learned Standing Counsel. However, the petitioner disputes service of the aforesaid physical copy of the notice dated 5.4.2018 and the order dated 30.6.2018. The written instructions do not make any assertion of service of the notice dated 5.4.2018 and the order dated 30.6.2018 (physical copies), on any date or through any mode. In fact the written instructions refer to and rely upon an application made by the petitioner’s Chartered Accountant dated 25.8.2018. It reads:

“The Assistant Commissioner,
Sector-17
Goods and Services Tax
Ghaziabad.  

Assessee Name: SR STEELS
GSTN: 09AOSPV9197B1ZZ

Sub: Reactivation of GST No.

Sir,

The Assessee registration cancelled by the officer by conducting one sided inquiry and also intimation not received by the assessee regarding cancellation of registration.

Against cancellation of registration, we are trying to file the revocation of cancellation application but due to technical issues application cannot proceed further. Now we have filed manual application for reactivation of said GSTN as expedient due to cancellation that could not do business that cause huge problem for them.

I request you to reactive the assessee GSTN
Thanking You”

HC quashes order cancelling GST registration without issuing SCN

Thereafter it is the case of the State respondents, despite the order cancelling the petitioner’s registration, the GST Portal continued to disclose the status of the petitioner firm as “active”. Occasioned by that the Assistant Commissioner, Commercial Tax, Sector-17, Ghaziabad wrote to the Joint Commissioner (IT), Commercial Tax, Lucknow, dated 25.6.2020 seeking reconciliation of the aforesaid discrepancy. Consequent to that communication, on 15.7.2020 the impugned order regarding cancellation of petitioner’s registration has been served on the petitioner.

Thus according to the learned Standing Counsel, due notice had been issued to the petitioner and thereafter the order dated 30.6.2018 was passed to cancel the petitioner’s registration. Only technical issues have been resolved by means of the impugned order dated 15.7.2020 and that order does not adjudicate the rights of the parties. In fact it has no independent existence.

Lastly, learned Standing Counsel contends that the petitioner has adequate remedy of appeal against the order dated 30.6.2021 and also to seek recall of that order.

Having heard the learned counsel for the parties and having perused the record, undeniably cancellation of registration has serious and far reaching consequences on the rights of the dealer/person engaged in any business. Such cancellation may even take away the right to conduct business. Also, in the context of the GST Laws, it has further consequence of upsetting ITC entitlement on sale and purchase by such a person/dealer. Even so, the Act itself obligates the authority to issue a prior notice and afford a proper opportunity of hearing to the concerned before cancellation of his registration. This mandatory requirement is contained in the first proviso to Section 29(2) of the UPGST Act, 2017. Before an order cancelling the registration may be upheld or be allowed to exist or recognized in law it must therefore be undisputed that the affected dealer/person had been issued a proper prior show cause notice in that regard and he had been afforded adequate opportunity to defend.

In the facts of the present case, undisputedly the notice that was uploaded on the GST Portal was unintelligible. Other than the year “2017-18”, the words “LODHAN SHIVPUR, CHANDMARI, 221003-VARANASI, GSTN-09DYBPK2587N3ZP and the numerals “7” and “0-325” all other characters appearing in the paragraph i.e. paragraph meant to contain the reason to cancel the registration are “?”, only.

As to the physical copy of the notice claimed to have been served, we find that the instructions produced by the learned Standing Counsel only contain a copy of that communication but there is neither a firm assertion nor any proof of service of such notice. The narrative appended to the instructions received also does not recite in any way that the physical copy of the notice had been served on the petitioner, on any particular date. Same is the position with respect to the order dated 30.6.2018. In fact that order is not even claimed to have been uploaded on the GST Portal.

In such circumstances, reliance placed by the Respondent State Authorities on the application made by the petitioner’s Chartered Accountant (extracted above) is misplaced. The said application nowhere admits the fact of the show cause notice dated 5.4.2018 or the order dated 30.6.2018 having been served on the petitioner. In fact it states that the same had not been received by the petitioner. As to the application to recall the order dated 30.6.2018, the application only states that the petitioner is seeking to file an application to recall that order.

It may have been one thing if the status of the petitioner’s registration had been reflected “cancelled” on the GST Portal. On the contrary, learned Standing Counsel fairly states that for some technical reason, despite the order dated 30.6.2018, the status of the petitioner’s registration continued to display on the GST Portal as “active”. That being the case of the State, the order dated 30.6.2018 could not be given effect to till as late as 15.7.2020 and that status came to be changed only upon further communication made by the Assistant Commissioner, Commercial Tax, Sector-17, Ghaziabad to the Joint Commissioner (IT), Commercial Tax, Lucknow on 25.6.2020. Therefore a lead consequence does arise in law that the order dated 30.6.2018 was neither served on the petitioner nor given effect to, till 15.7.2020.

In view of the further fact that the show cause notice dated 5.4.2018 as served on the petitioner was unintelligible and physical copy of the said notice was not served at the relevant time, the order cancelling the petitioner’s registration is found to be wholly ex-parte being contrary to the mandatory requirement of the first proviso to Section 29(2) of the Act. As to the delay, the petitioner has explained the same on account of the spread of the pandemic COVID-19.

In the peculiar facts of the present case as have been noted above, we lift the bar of alternative remedy as we find that the petitioner’s registration was cancelled without issuance of any prior show cause notice. Also, the delay is largely on account of the conduct of the State respondents or conduct attributable to the State respondents as they alone were responsible to update the information on the GST Portal. That not done, the petitioner/citizen may not be relegated to the forum of alternative remedy as his valuable right to do business has been curtailed in violation of principle of natural justice.

Accordingly, the order dated 30.6.2018 cancelling the petitioner’s registration is set aside. The matter is remitted to respondent no.3 to pass a fresh order, in accordance with law.

At present, learned counsel for the petitioner has been served with the copy of the show cause notice dated 5.4.2018 and the order dated 30.6.2018. It is expected that the petitioner would file his reply within a period of two weeks from today. Upon such reply being filed, respondent no.3 may proceed to fix a date for hearing next fifteen days and pass appropriate orders, within a month therefrom.

With the above observation, the writ petition is allowed. No order as to costs.

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