GST Officer rebuked for canceling GST Registration without any proper reasons

GST Officer passed a plain order of cancellation of GST Registration along with the demand of Rs. 8Cr.

The taxpayer, being dissatisfied with the aforesaid order passed by the Commercial Tax Officer, canceling the Registration, filed a writ application with Gujarat High Court.

Court, noticed that the Show cause notice was issued with even any basic information or details. Further cancellation of order was passed with just one line “Dealer is engaged in bogus billing”.

What Court said:

4. This litigation has really disappointed us and that too at the end of a tiring day. We are disappointed for two reasons; first, the mode and manner in which the entire exercise has been undertaken by the Commercial Tax Officer in canceling the registration and secondly the vehemence with which the learned AGP has opposed this writ application despite serious shortcomings in the impugned action. When we pointed out to the learned AGP that the show-cause notice is as vague as anything, the learned AGP very vehemently maintained that the show-cause notice contains the minutest of the details on the basis of which the writ applicant could have given a proper and effective reply. The first thing we take notice of is that there are no reasons assigned in the show-cause notice. What has been done is mere incorporation of the provisions of Rule 21(b) of the Rules. If that is to be termed as reasons, then we are really left wondering as to how do we adjudicate such matters. In the final order, canceling the registration, there is just one line stated: “Dealer is engaged in bogus billing”.

5. We inquired with the learned AGP that if such a show- cause notice would have been issued to him, how he would have replied in the absence of any basic information or details. Mr. Sharma submitted that the show-cause notice is in the proforma, i.e, Form GSTREG- 17/31. In the show-cause notice, it has been brought to the notice of the writ applicant that he is engaged in bogus billing and that is sufficient for the writ applicant to understand what the authority is talking about.

6. We are sorry to say that the Commercial Tax Officer has not only cut a sorry figure for himself but has also made a mockery of justice. He has also made a mockery of the provisions of law. If such is the understanding of the Commercial Tax Officer, then he does not deserve to remain in office even for a day. We are constrained to use some harsh words because this is a common feature. Everyday we come across matters of the present type and the officers are not ready to understand.

7. The whole object of issuing a show-cause notice is to make the recipient of the notice understand what the authority is trying to convey and what are the nature of the allegations. In the case on hand, when there are allegations of bogus billing, it was expected of the authority to at least furnish some information about such bogus billing. At this stage, Mr. Sharma submitted that along with the show-cause notice, there is always few documents attached which would indicate what the authority wants to convey about the bogus billing. It has been stated on oath not only in the memorandum of the writ application but even in the reply to the show-cause notice that except the show-cause notice, nothing else was furnished or nothing was attached to such show- cause notice.

8. A show cause notice has great significance in the adjudication proceedings for the mandatory compliance of the principles of natural justice . Show cause notice is a mandatory requirement for raising any demand under the Act, 2017 except payment of interest u/s 50 and assessment of non filer of returns u/s 62 of the act. The SCN is the foundation on which the adjudicating authority has to build up its case. It is the document served on the taxable person asking him to explain with reason as to why a particular course of action should not be taken against him. It must be a speaking and well reasoned document. The issue of SCN is not only to make aware the taxable person against whom the action is intended to be taken but must contain brief facts of case and grounds relied upon for the proposed action and language in precision, the reading of which makes the person concerned understand the case that he has to defend. It should not be issued on assumptions and presumptions. The allegations and findings in the SCN should be supported by some documentary evidences.

Final Decision

The court  quashed and set aside the order, canceling the registration on the ground of vague show-cause notice bereft of any material particulars. Further the court added that the authority may issue a fresh show-cause notice if it intends to, but such fresh show-cause notice should contain all the necessary details and information about the alleged bogus billing to enable the assessee to file an effective reply to the same.