GST Update No 288 on cancellation of GST registration adversely affects business

The revenue authorities are cancelling the registration of the taxpayers on frivolous grounds which is huge cause of concern for the taxpayers. There had ben various Judicial Precedents wherein the High Courts have bashed the revenue authorities since the taxpayers faced the agony of these practices adopted by the revenue authorities. On similar lines, recently one case was reported before Calcutta High Court in the case of BISWESWAR MIDHYA V/S THE SUPERINTENDENT, CGST. The analysis of this decision is the subject matter of discussion of today’s update.
The petitioner challenged the show cause notice issued for cancellation of registration. Various repeated summons was issued by the audit wing to the petitioner. However, till date no adjudication order quantifying the tax liability payable by the appellant was issued till date. Hence, the show cause notice issued to cancel the registration on the grounds of failure to pay tax and penalty would not arise. It was contended that it is not clear as to why the departmental authorities are taking so long to reach to its logical end. Hence, the show cause is not tenable since no proper procedure was followed.
The Court stated that suspension of registration would work against the interest of revenue since then the taxpayer will not be able to carry on the business and raise the appropriate invoice. Consequently, this will impact the recovery of taxes. Therefore, a pragmatic view is to be taken since the taxpayer is not to be treated as a person hostile to department since no dubious process is adopted by him. It was further observed that various notices and summons were issued by the department to which the petitioner responded appropriately. However, it cannot be concluded as to why the departmental authorities did not proceed further. It was held that the Court/ Judiciary is not liable to advise the revenue authorities as to how they should act. It is open to them as to how
they should proceed further. It was therefore directed to revenue authorities to revoke the suspension of the registration and then to issue show cause notice within a period of 7 days. It was also stated that the appellant should be given a reasonable time to submit his objection against the show cause notice. Thereafter, the show cause notice shall be adjudicated and a reasoned order by passed on the merits and in accordance with law.
The above favouring decision is setting yet another example that proper procedure should be followed by the revenue authorities before initiating proceedings for cancellation of GST registration. Furthermore, reference can be drawn to the decision of Madras High Court in the case of LUCKY MYDEEN BRIYANI V/S COMMISSIONER wherein decision on parallel parameters was delivered. It is high time that these settled judicial rulings should be taken into account before initiating any proceedings for cancellation of GST registration against the assessees as it adversely effects the business of the taxpayers.

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GST Update No 288 on cancellation of GST registration adversely affects business

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