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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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GST Update No 279 on cancellation of registration on arbitrary basis

GST Update No 279 on cancellation of registration on arbitrary basis

Opinion

Time and again the revenue authorities are bashed by the Hon’ble High Courts on acting frivolously and negligently. There had been various cases in the erstwhile indirect tax regime wherein the cost was imposed on the revenue department for acting arbitrarily as it is often observed that the departmental authorities do not consider the submissions of the taxpayers. Recently, one case was reported on similar issue before the hon’ble ALLAHABAD HIGH COURT in the case of DRS WOOD PRODUCTS V/S STATE OF U.P. wherein the departmental authorities have cancelled the GST registration arbitrarily. The decision imparted in this case is subject matter of discussion of our present update.
The petitioner filed the appeal as on 18.01.2021 against the order wherein the application for revocation of cancellation of registration was rejected. The petitioner is engaged in the business of manufacturing and trading of Veneer and was granted GST registration. A show cause notice was issued alleging that registration is liable to be cancelled since the taxpayer is non-functioning and non-existing at the principal place of business. Subsequently, order for cancellation of registration was also passed. The petitioner when tried to upload the E-way bill, came to know that the registration of the firm was cancelled and hence applied for revocation of cancellation of registration. It was submitted that the said application is filed within time as prescribed under Section 30 of the Act. However, the application filed was objected by way of issuance of show cause notice. The petitioner further moved an application seeking extension of 15 days for filing reply to the show cause notice due to marriage of daughter of the petitioner. However, no attention was paid to the request of the petitioner and the application for revocation of registration was also rejected alleging that no satisfactory explanation was provided by the petitioner. The petitioner, therefore, filed an appeal and submitted that the business was running from the premises under
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consideration. The Appellate Authority dismissed the appeal stating that upon investigation by the departmental officers, it was concluded that no business or activity was undertaken on the property. Further one of the partners was on the phone and did not gave any clear reply. Furthermore, there were no stocks or commercial activity found on the business premises. Moreover, it was recorded in the inspection report that another firm in another name and GSTN was found working from the same spot. Hence, it is an outright example of tax evasion.
The Counsel of the petitioner contended that the initial SCN based on which registration was cancelled was never served upon the petitioner. It was submitted that the appellate authority has erred in dismissing the appeal since the inspection report is of 2020 and inquiry was conducted in 2018 which were neither supplied to the petitioner and nor petitioner was confronted to respond to them. It was argued that none of the grounds as provided under Section 29 of the Act were established against the petitioner. Reference was drawn on to the decision of Apex Court in the case of Oryx Fisheries Private Limited V/s Union of India and Ors. and on Commissioner of Central Excise, Bangalore V/s Brindavan Beverages (P) Ltd and Ors. Further reference was drawn to various rulings of this Court i.e. Apparent Marketing Private Limited V/s State of U.P. & Ors. M/s Ansari Construction V/s Additional Commissioner Central Goods and Service Tax (Appeals) and M/s S.S traders V/s State of U.P. & Ors.
The Counsel of respondent argued that on the grounds of investigation being carried on, it can be stated that on the place of business of firm, no business activity was undertaken and another business firm was working on the same business site as well. The partner of the firm even did not cooperate during the investigation and no reply was submitted by the petitioner. Further, it was argued that the petitioner might have kept the goods at any other place.
The Court held that the show cause notice issued depicts the opaqueness of allegation raised against the petitioner. The show cause notice does not indicate any date as to when the investigation was carried out. Therefore, the vaguely issued SCN is violative of principles of administrative justice. Cancellation of registration is a serious consequence which thereby affects the fundamental
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rights of carrying business. The casually issued notice demonstrates that the departmental authorities were not judicially trained since the same is lacking in terms of quasi-judicial fervor since no reasoning is mentioned. The order rejecting the revocation application has taken the matter to the height of arbitrariness since no reasons were recoded in the same. Further, the adjournment request of the petitioner was also not adhered to. The investigation report on which the Appellate Authority relied on was never communicated to the petitioner. Thus, highlighting the arbitrary manner in which quasi-judicial and appellate authorities are working under GST Act. The manner of disposal can neither be appreciated nor accepted. Therefore, the authorities have failed to act in the light and spirit of the GST Act. Furthermore, it was stated that arbitrary exercise of power of cancellation of registration not only affects the business of the petitioner adversely but also the flow of revenue that could have flowed to the department. The action of the authorities is not in line with the principle of ease of doing business. It was therefor held that the registration of the petitioner shall be renewed and directed to State Government to pay the cost to the petitioner of Rs. 50,000/-.
The above decision has proved to be a silver lining for the trade and industry. It is high time that these Judicial Rulings should be taken into consideration by the department before initiating proceedings for cancellation of GST registration which adversely effects the business and revenue flow to the government.

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