GST registration could not be suspended and cancelled on basis of direction of Head Office without assigning any reason; High Court sets aside cancellation order
HIGH COURT OF TELANGANA
S.B.Traders
v.
Superintendent
UJJAL BHUYAN, CJ.
AND C.V. BHASKAR REDDY, J.
W.P.NOS.39498 & 39502 OF 2022
OCTOBER 28, 2022
Registration – Cancellation of registration – Show cause notice was issued as to why registration should not be canceled as same was obtained by means of fraud, willful misstatement or suppression of facts – Reply to show cause notice was filed and on same day order was passed canceling GST registration on ground that same has been canceled as per directions of Head Office – HELD: Absence of any reason to issue show cause notice for cancellation of registration – Particulars of any fraud, willful misstatement or suppression of facts have not been mentioned in notice – Suspending registrations on basis of direction of Head Office could not be a reason for cancellation of GST registration – Notice issued and order passed exhibit complete non-application of mind – Order cancelling registration was to be set aside [Section 29 of Central Goods and Services Tax Act, 2017/Telangana Goods and Services Tax Act, 2017] [Paras 5, 8 to 10] [In favour of Assessee]
ORDER
Ujjal Bhuyan, CJ. – Heard Mr. Bhaskar Reddy Vemireddy, learned counsel for the petitioners and Mr. B.Narasimha Sarma, learned Standing counsel for Income Tax Department appearing on behalf of the respondent Nos. 1 & 2. Also heard Mr. G.Praveen Kumar, learned Deputy Solicitor General of India for respondent No.3.
2. By filing these petitions under Article 226 of the Constitution of India, petitioners have assailed the legality and validity of the orders dated 12.10.2022 passed by the Superintendent, Mehdipatnam-II Circle, Hyderabad ordering cancellation of Goods and Services Tax (GST) registration of the petitioners.
3. Petitioners before us are the proprietary concerns engaged in the business of purchase and sale of iron scrap. Following enactments of the Central Goods and Services Tax Act, 2017 and related laws, petitioners got themselves registered with the GST authorities having GST registrations as follows:
“GSTIN No.36DHGPA5935L1Z4 and GSTIN No.36DWAPA209G1ZT”
4. First respondent i.e., Superintendent, Mehdipatnam II Circle, issued show cause notices to the petitioners on 29-9-2022 calling upon the petitioners to show cause as to why their GST registration should not be cancelled. The reason given for cancellation of GST registrations is as follows:
“1. In case, Registration has been obtained by means of fraud, wilful misstatement or suppression of facts.”
5. From the above, it is evident that there is no reason at all to issue show cause notice for cancellation of GST registrations of the petitioners. Respondent simply mentioned that in case the petitioners have obtained GST registration by means of fraud, wilful misstatement or suppression of facts, then their GST registrations were liable to be cancelled. No particulars of any such fraud, wilful misstatement or suppression of facts have been mentioned. In fact the notice issuing authority himself was not certain whether the GST registrations were obtained by the above means. Therefore, he says that ‘in case registrations were obtained by such means’.
6. We are of the view that on such surmises and conjectures, no show cause notices could have been issued by the first respondent. Issuance of show cause notice for cancellation of GST registration has got serious consequences and could not have been issued in such a cavalier manner.
7. Proceeding further, we find that by the aforesaid show cause notices, petitioners were directed to furnish reply within seven working days from the date of service of notices. Show cause notices are dated 29-9-2022. However, in the very next line, petitioners were directed to appear before the first respondent on 30-9-2022 @ 11.40 A.M. If the petitioners were given seven working days time to submit reply, it is beyond comprehension as to why the petitioners should be directed to appear before the Superintendent on the very next day i.e., on 30-9-2022 @ 11.40 A.M. Further, we find that as per last sentence of the show cause notices, petitioners’ registrations were suspended w.e.f. 29-9-2022.
8. Coming back to the impugned orders, we find that petitioners had submitted show cause reply on 12.10.2022 and on the very same day i.e., on 12.10.2022, the impugned orders were passed cancelling GST registrations of the petitioners. The reason given for such cancellation is that as per directions of the Head Office dated 28-9-2022, the registrations were suspended and cancelled. What was the direction of the Head Office was not disclosed. Suspending registrations on the basis of direction of the Head Office cannot be a reason for cancellation of GST registration.
9. From a conjoint reading of the show cause notices and orders for cancellation of the registrations, we are of the view that conduct of the first respondent does not at all inspire the confidence of the Court. There appears to be something amiss in the entire affair. The show cause notices were issued and the impugned orders were passed in a most mechanical manner exhibiting complete non- application of mind.
10. Accordingly, we set aside the impugned orders for cancellation of GST registration dated 29-9-2022 of the petitioners. We further direct the Principal Commissioner of Central Tax, Hyderabad Commissionerate, to look into the conduct and functioning of the first respondent and thereafter take remedial steps.
This writ petition is accordingly allowed.
Miscellaneous applications pending, if any, shall stand closed. However, there shall be no order as to costs.