GST Update No 341 on cancellation of registration for allegation of fraud without evidence

Time and again, the departmental authorities cancel the GST registration of the assessee on basis of arbitrary and frivolous grounds without proper justification or reasoning. This hampers not only the business of the taxpayers but also results into loss of revenue to the Government. However, it seems that the revenue authorities do not recognise this fact and vicious cycle on this issue keeps on revolving around in a continuous loop. Recently, on similar issue, one case was reported before Andhra Pradesh High Court in the case of M/S S A TRADERS V/S GOODS AND SERVICE TAX OFFICER. The decision imparted in this case is subject matter of our present update.

The petitioner argues that the cancellation of registration is illegal, arbitrary and hence, there is violation of the principles of natural justice. Therefore, it was assailed to set aside the impugned proceedings. The counsel of petitioner argued that the show cause notice was issued as on 01.10.2022 and order for cancellation of registration was also passed as on 01.10.2022. Thus, there is violation of principle of natural justice since the show cause notice mentions that “the registration is obtained by means of fraud and wilful misstatement.” In the cancellation order, it was mentioned that “on verification of GSTR-1 and GSTR-3B, it was observed that the TRP has made purchase and sale of scrap for which no clear records are submitted. Hence, the transaction is suspicious and therefore, registration stands cancelled.” It was therefore contended that the show cause notice and the order do not divulge any mistake committed in the due course of business, both the show cause notice and the order are not sustainable in the eyes of law. Reliance was placed on similar decision by Telangana High Court in the case of W.P. No. 39498 and 39502 of 2022.

The Court observed the case and held that the show cause notice and cancellation order both are dubious enough and fail to divulge the fraud committed by the petitioner. Both of them are not clear to understand the mind of issuing authority as regards to the allegation of fraud. Therefore, the impugned order issued does not hold good and are not liable to be sustainable in the eyes of law. Reliance was placed on decision of Telangana High Court as referred to by the assessee.

Therefore, the impugned notice and order was set aside directing the revenue authorities to issue fresh show cause notice and granting reasonable period of time to the assessee to submit any objections.

The above decision is yet another favourable decision wherein once again the Courts have explained the importance of passing reasoned order failing which entire proceedings are redundant. The show cause notice and the order should reflect clear reasons for violation of the provisions by the assessee. However, it is quite disheartening that the revenue authorities fail to recognise this issue. Time and again, this issue repeatedly travels upto the Court wasting the time of Judicial Authorities as well as of taxpayers.

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GST Update No 341 on cancellation of registration for allegation of fraud without evidence

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