GST update No 187 on physical verification without knowledge of taxpayer

Registration contributes significantly towards increasing the revenue base of the government. Recently, CBIC issued a Notification No. 62/2020- Central Tax dated 20.08.2020, and directed the filed officers to carry out physical verification of the premises of the businesses which were granted registration between 21st Aug to 16th Nov to ascertain the genunity and intention behind undertaking a transaction. However, looking at the other side of the story, it is quite disheartening that the revenue authorities cancel the registration of the taxpayers on frivolous and vague grounds without even providing an opportunity of hearing to them. On similar lines, one such issue was raised before Delhi High Court in the case of M/S MICRO FOCUS SOFTWARE INDIA PRIVATE LIMITED V/S UNION OF INDIA. The decision imparted in this respect is the subject matter of discussion of our present update. The petitioner filed writ petition against the order of cancellation of registration dated 09.12.2020 and furthermore, rejected application of revocation of registration dated 18.02.2021. The petitioner was issued a Show Cause Notice dated 11.11.2020 since the business of the petitioner was dysfunctional at the given address. From Dec, 2019, the petitioner company discontinued its business but it did not apply for registration suo-moto since credit notes pertaining to the FY 2020-21 were issued against supply made upto Dec, 2019. Further, to amend incorrect details reported in GSTR filed during FY 2019-20, to furnish GSTR-9 and 9C for FY 2017-18/2018-19 due to extended due dates and filing of refund claims. The Counsel of Petitioner argued that there was violation of principles of natural justice on the part of revenue authorities since as per Rule 25 of the CGST Rules, 2017, notice has to be CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 given to the petitioner before carrying out any physical verification of the premises which was not given to the petitioner. Furthermore, no heed was paid to the communication dated 12.11.2020 by the petitioner for grant of extension of time. The reply of petitioner was also not taken into consideration while passing the order. It was also contended that the physical verification report was not submitted even after order dated 09.12.2020 was passed. The Counsel of respondent argued that opportunity of hearing was provided to the petitioner show cause notice in this respect was already issued. However, since no response was received the order was passed accordingly. Further, it was argued that even if order is passed without opportunity of haring, petitioner should have relegated to alternate remedy. The Court held that the no reference of reasons was made in the order passed by the departmental authorities. Furthermore, the show cause notice issued contains reason to show cause as to why registration should not be cancelled and revocation application should not be rejected. It was held that as per Rule 25 of CGST Rules, 2017, requires physical presence of the person whose property is being inspected, which was not in the present case. It was therefore, directed to departmental authorities revive the registration of the petitioner and to petitioner to apply for de-registration suo-moto after completing the return filing formalities. The above decision is yet another example of the subject that any order passed without providing opportunity of hearing is void and baseless. There had been various cases in pre and post GST regime wherein the rulings were imparted in favour of the business houses in case of violation of principles of natural justice. It is high time that revenue authorities should understand the importance of this principle rather than turning a blind eye failing which will lead to increase in the unwanted litigations. Further, the Government should also take strict steps to ensure that the lacuna in affording reasonable opportunity to the assessee for defending their case is resolved at the earliest possible to save the precious time of court.

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GST update No 187 on physical verification without knowledge of taxpayer

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