Cancellation of GST Registration with Case Law
This Article is Analysing on if the cancellation was done without consider conditions stipulated under section 29(2) of the Act.
The latest judgement of the Allahabad High Court Apparent Marketing Private Limited Vs State of U.P.
(Allahabad High Court)
Appeal Number: Writ Tax No. 348 of 2021 Date of Judgement/Order: 05/03/2022
The registration once granted could be cancelled only if one of the five statutory conditions was found present. Per se, no registration may be cancelled by merely describing the firm that had obtained it, was “bogus”. The word “bogus” has not been used by the statute. The only contingency to which such expression may relate may be one appearing under Clauses (c) and (d) of Section 29(2) of the Act being where a registered firm does not commence its business within six months of its registration
The proper officer may cancel the registration if any of the five conditions and the condition of the first proviso to the section 29 (2) of the CGST Act 2017 are fulfilled. The Proper Officer cannot quote his own reason and go beyond the reasons stated in the said section for purpose of cancellation of registration.
Cancellation of GST Registration was done without consider conditions stipulated under section 29(2) of the Act. The latest judgement of the Allahabad High Court has been considered in this article.
Section 29(2) of CGST Act 2017
The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where, –
- Registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed;
- a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or
- any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or
- any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
- registration has been obtained by means of fraud, wilful misstatement or suppression of facts:
Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard:
[Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.]
Apparent Marketing Private Limited Vs State of U.P.
(Allahabad High Court)
Writ Tax No. 348 of 2021 Date of Judgement/Order: 05/03/2022
Therefore, the registration once granted could be cancelled only if one of the five statutory conditions was found present. Per se, no registration may be cancelled by merely describing the firm that had obtained it, was “bogus”.
GST Registration not cancellable by merely describing the firm as ‘Bogus Firm’
The word “bogus” has not been used by the statute. The only contingency to which such expression may relate may be one appearing under Clauses (c) and (d) of Section 29(2) of the Act being where a registered firm does not commence its business within six months of its registration.
Other than that, the term “bogus” may also refer to a satisfaction contemplated by Section 29(2)(c) of the Act where registration may be cancelled if the registered firm has not furnished its return for continuous period of six months. Those conditions have not been shown to exist in this case.
“Order of Rejection of Application for Revocation of Cancellation
This has reference to your reply filed vide ARN AA0908200548721 dated 17/08/2020. The reply has been examined and the same has not been found to be satisfactory for the following reasons:
1. Reason for revocation of cancellation – Others (Please specify) – Your firm was found bogus in inspection of SIB. Information received from headquarter.
2. Reject due to Reply has not been found satisfactory. Therefore, your application is rejected in accordance with the provisions of the Act.”
In view of the discussion made above, the charge levelled in the notice dated 22.07.2020 and as was reiterated in the order dated 13.08.2020 and the further notice dated 21.08.2020 are wholly, vague. Effectively, it prevented the assessee to rebut the same. The statute contemplates issuance of the notice in specified circumstances for specific grounds. Those could not be diluted or muddled or made vague by describing the assessee firm as “bogus”. In absence of any specific charge, the respondent authority could not be permitted to proceed to cancel the assessee’s registration.
Though it may remain open to the Assessing Authority to issue a fresh notice with exact charge specification, the proceedings arising from the impugned notice is inherently defective.
It is equally remarkable to note that the Appeal Authority also chose to consider the matter on merits. Though the appeal is a continuation of original proceedings and it may have been open to the Appeal Authority to hear and decide the matter on merits, however, in absence of any legally permissible reason given by the original authority, the only proper course the Appeal Authority may have adopted, may have been to set aside the orders dated 13.08.2020 and 21.08.2020. Unless the Appeal Authority had corrected that error of the original authority especially in matters of procedure, such mistakes are liable to be repeated affecting numerous citizens/assessees.
For the reasons noted above, the orders dated 12.02.2021, 21.08.2020 and 13.08.2020 cannot be sustained. They are set aside. Accordingly, the present writ petition succeeds and is allowed. It is left open to the respondent authority to issue a fresh notice on any specified ground mentioned under Section 29(2) of the Act. That proceeding, if initiated, may be decided on its own merit, without being prejudiced by any observation made in this order. No order as to costs.