GST UPDATE NO. 67TH ON CANCELLATION OF REGISTRATION IS IMPERMISSIBLE FOR REASONS BEYOND STATUTORY PROVISIONS

The provision regarding cancellation of registration by the departmental authorities in GST as contained in section 29 of the CGST Act, 2017 is very harsh as it is often observed that the registration is cancelled for frivolous reasons which adversely impacts the business as restoration of registration is also time-consuming process. Recently, the hon’ble Kerala High Court in the case of FR TRADE LINKS VS THE STATE TAX OFFICER, allowed the writ petition filed for restoration of registration as the registration was cancelled for reasons not prescribed in section 29 of the CGST Act, 2017. The outcome of this decision is the subject matter of discussion of our present update. The GST registration of the petitioner was cancelled by the officer on the ground that the business place is situated in the first floor of the three storied building which is partially completed with structure only and no building number is affixed by the local authority. It was stated that the business place is an open space in pillars, having no partition walls or shutter. No building number is seen affixed by the local authority and no stock was present in the business premises. There is only a banner with phone number & GSTIN in the wall of three storied building. In such circumstances, it was concluded that the business of the petitioner did not exist and the registration was cancelled. The petitioner has also produced the receipt of the building tax paid to the government but without considering this document, the GST authority had cancelled the registration based on the report of the intelligence officer. The Hon’ble Kerala High Court held that the reason for cancellation of registration in the petitioner’s case is not covered under the provisions of sub-section (2) of section 29 of the CGST Act, 2017 and so the cancellation of registration is not at all justified. Moreover, it was held that the State Tax Officer is the proper officer for assessment and also to invoke provisions of Rule 25 of the CGST Rules. The State Tax Officer has issued a notice to cancel the registration of the petitioner based only on the report of the intelligence officer. It is clear that the State Tax Officer himself did not conduct any enquiry as per Rule 25 inspite of the fact that the petitioner had produced the receipt of the building tax to prove the authenticity of his stand. Resultantly, the writ Petition is allowed and the State Tax Officer was directed to restore the registration of the petitioner. The above decision is very beneficial to the assessees as it is observed that the show cause notices and orders for cancellation of registration are being passed callously without proper enquiry by the state tax officer. The revenue authorities should form an opinion based with sufficient evidences and expressly state the reasons for taking any strict action such as cancellation of registration because these acts adversely hamper the regular functioning of the business.

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GST UPDATE NO. 67TH ON CANCELLATION OF REGISTRATION IS IMPERMISSIBLE FOR REASONS BEYOND STATUTORY PROVISIONS

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