GST Cancellation Order quashed by High Court where no enquiry was conducted by Proper Officer

Kerala High Court ordered u/s 29(2) of CGST and SGST Act, 2017 that only proper officer shall proceed with cancellation and registration.

The petition before the High Court of Kerala by the registered person of this petition, challenging the orders canceling his certificate of registration under the CGST/SGST Act and rejection of his application for revocation of cancellation of registration certificate.

Facts in Issue

• The respondent canceled the registration under the Sub Section (2) of Section 29 of the CGST/SGST Act, 2017 on the basis that during the inspection, it was found that no business was conducted at the place of the principal business center. The building was not having any building number or shutter and no books of accounts were placed at that place of principal business. The door was fully opened and some water tanks were kept. The building was found to be having no change in the structure during the second inspection.
• In the second inspection, it was found that some stock was kept at the new premises near the house of the petitioner, but that place was not added in the GST registration and therefore, it was suspected to be bogus. The business in the name and style of ‘F.R Trade Links’ was not found functioning in the given address and therefore, impugned action was taken.

Observations

“Section 29: Cancellation or suspension of registration

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, were, –

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b) a person paying tax under Section 10 has not furnished returns for three consecutive tax periods; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d) any person who has taken voluntary registration under Sub Section (3) of Section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, willful misstatement, or suppression of facts;

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Provided further that during the pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.”

Subsection (2) of Section 29 does not envisage the contingency of situation or place of business in a partially completed building having no building number affixed on it by the local authority. Such is not the reason as contemplated by Subsection (2) of Section 29, authorizing the proper person to cancel the registration of a person in the exercise of the powers conferred by the relevant provision of the statute. Consequently, the impugned order at Ext.P8 cannot stand in the scrutiny of law. Consequently, the order of rejection of application for revocation of cancellation is also illegal and cannot stand in the scrutiny of law.

Judgment

Justice A.M. Badar held that the writ petition is allowed. The impugned orders at Exts.P8 and P12 are quashed and set aside. Consequently, the respondents are directed to restore the registration of the petitioner. Further explaining that the proper officer, as such, ought not to have proceeded ahead with cancellation of the registration on the basis of the report of the intelligence officer. The proper officer ought to have independently assessed the situation, particularly, when the petitioner had produced the receipt of the building tax from the local authority (Ext.P3) to prove the authenticity of his stand. This seems to have been not done by the proper officer. The application for revocation of cancellation of registration is also rejected by the respondent without proper inquiry in the matter.