GST Update 348 on issuance of GST REG-31 instead of registration cancellation notice

It is commonly observed that the tax authorities unnecessarily issue vague GST cancellation notices resulting into harassment of the assessees. There had been various cases earlier as well wherein departmental authorities even demand unnecessary documents other than those specified in law in order to grant GST registration. On similar notes, one more case was reported related to cancellation of GST registration before Kerala High Court in the case of Pankaj Cottage V/s Goods and Service Tax Officer. The decision imparted in this case is subject matter of our present update.

The assessee was issued an order for cancellation of GST registration as on 04.04.2022. The show cause notice was although issued electronically, but the same never came to the attention of the petitioner. When the petitioner came to know about the notice, a revocation application was filed which was rejected subsequently being time barred. Therefore, an appeal was preferred under section 107 of CGST Act, 2017.

The counsel of petitioner submitted that the entire procedure adopted by the tax authorities is illegal and unsustainable. Referring to provisions of CGST Act, 2017, it was argued that the notice in itself is not valid as per Rules. It was argued that the show cause notice should have been issued in GST REG-17. However, show cause notice was issued in GST REG-31 which is proceedings related to suspension of GST registration. Furthermore, it was argued that none of the particulars as required in show cause notice in GST REG-17 were specified in the notice issued. Further, GST REG-31 is not issued in its entirety. The officer issued notice containing vague details of reasons for cancellation which is not permissible in law. Reliance was placed on decisions of Gujarat High Court in the case of Aggarwal Dyeing and Printing V/s State of Gujarat and Sing Traders V/s State of Gujarat wherein it was delivered that show cause notice is vague and cancellation order does not specify the factors and therefore entire proceedings are bad in law. Moreover, the delay in filing of returns and payment of tax was on account of severe financial crisis.

The counsel of respondent contended that scheme of cancellation of registration is inbuilt into provisions of Section 29 and 30 of CGSTG Act, 2017. Further, it was argued that CGST Act is a fiscal legislation and the provisions of the same are to be interpreted strictly in favour of revenue. The provisions of Section 29 of CGST Act, 2017 are incorporated for strict compliance with tax laws and the failure of petitioner to file returns resulted into cancellation of registration. Furthermore, it was argued that decision of Madras High Court in the case of Suguna Cutpiece Center V/s Appellate Deputy Commissioner (ST) GST, Salem; (2022) 99 GSTR 386 (Mad) and those of Gujarat High Court in Aggarwal Dyeing and Printing V/s State of Gujarat and Sing Traders V/s State of Gujarat actually travel outside the scheme of provisions of the Act and therefore cannot be referred to. Further, the notices issued are ones generated out of systems and carry sufficient clarity and reasons of cancellation. Reliance was placed on decision of Karnataka High Court in the case of M/s M.S. Retail Private Limited V/s Union of India and Madhya Pradesh High Court in Rajdhanai Security Force Pvt. Ltd. V/s Union of India.

The Court observed the facts and held that notice was issued in GST REG-31 which is related to suspension proceedings and cannot be treated as a show cause notice under Rule 21 of CGST Rules, 2017. Further, the notice does not contain all the details as per the said Rule. The officer issued notice under GST REG-31 and omitted the specific details and treated the same as cancellation notice. It is principle heart of administrative law, where law requires a thing to be done in particular manner, it must be done in particular manner only. Reliance was placed on Babu Verghese V/s Bar Council of Kerala. Therefore, it was held that the action taken by the officer is without jurisdiction and notice must be issued in GST REG-17. The decision of Gujarat High Court as relied by assessee is identical in present situation wherein it was concluded that the show cause notice is inadequate as no reasons were specified because of which the officer-initiated action. The decision on which counsel of respondent placed reliance on were delivered in a completely different situation. Reliance was also place on decision of Supreme Court in the case of Commissioner of Customs (Import), Mumbai V/s Dilip Kumar and Company and Others and Government of Kerala and another V/s Mother Superior Adoration Convent. The petition was therefore disposed off and the cancellation order will not have effect of absolving the petitioner of any fiscal liability. The registration will be restored within 2 weeks and it was ordered to file all the pending returns.

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GST Update 348 on issuance of GST REG-31 instead of registration cancellation notice

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