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CA Pratibha Goyal | Sep 17, 2022 | Views 6543

GST Registration cannot be granted in respect of a Premise that is under dispute: HC

GST Registration cannot be granted in respect of a Premise that is under dispute: HC

In the matter of Parveez Ahmad Baba vs Union Territory of J&K and others, the High Court of Jammu & Kashmir has pronounced that GST Registration or  Food Safety and Standards Authority of India (FSSAI) Licence cannot be granted or Renewed in respect of a Premise that is under dispute.

As per the Court, until the dispute is settled, neither the designated authority under the Food Safety and Standard Act, 2006 shall issue the license nor registration shall be accorded under the GST Act.

The Facts of the case are:

a) In the year 1993, the petitioner, Parveez Ahmad Baba, and his brother (Respondent No. 5) jointly purchased a two-storeyed tin roof building along with land measuring 1844 sq. feet situate at Kothibagh Bund, Srinagar [“the subject property”] from one Mohd. Sultan R/o Gow Kadal, Maisuma, Srinagar in terms of a sale deed executed on 17th May, 1993. It is, however, the case of the petitioner that the entire consideration amount was paid by him and the name of his brother was also included in the sale deed as vendee, though, he had not paid even a single penny towards purchase of the subject property.

b) The further petitioner claims that the subject property was rebuilt into a six storeyed building and in the ground floor whereof, he started running a restaurant under the name and style of Samci Restaurant and rest of the floors were rented out by the petitioner to different tenants.

c) The Samci Restaurant was got registered with the Srinagar Municipality by the petitioner in his own name and not only did he deposit the fee payable to the Municipality but he also incurred from his own pocket other charges as well. It was in the year 2005, M/s A.R. Traders, Residency Road Srinagar raised dispute in respect of a shop in the ground floor, claiming the same to have been purchased by him from the erstwhile owner i.e. Sh. Mohd. Sultan.

d) M/s A.R.Trader filed OWP No.933/2005 in this Court. The petitioner settled the dispute with M/s A.R.Traders and in terms whereof, the petitioner paid Rs.4,50,000/- to M/s A.R.Traders and in lieu of the said amount M/s A.R.Traders relinquished their claim and accepted the judgment of the Financial Commissioner (R), J&K as well as the Deputy Commissioner, Srinagar as valid.

e) The petitioner applied for and was granted license under the Prevention of Food Adulteration Act on 1st November, 2006 for running the restaurant by Srinagar Municipal Corporation, the Licensing Authority. The petitioner also simultaneously obtained a certificate of registration from the Directorate of Tourism in the year 2008. The petitioner submits that he also availed loan from the Jammu & Kashmir Bank Limited for running the aforesaid business and in this regard got a deed of guarantee executed from respondent No.5 and one Ishtiyaq Ahmed Baba with the bank on 22nd November, 2013. Respondent No.5 not only acknowledged the petitioner as sole proprietor of M/s Samci Restaurant but he also stood as guarantor for repayment of the loan taken by the petitioner for maintenance and running of the restaurant. The petitioner has also placed on record several other documents to fortify his claim that insofar as Samci Restaurant is concerned, it is the petitioner and petitioner alone, who is sole owner exclusively running it and with which respondent No.5 has no concern or connection.

f) The petitioner submits that the electricity and water charges for electricity and water connection given by the PDD and PHE departments respectively have all along been paid by the petitioner. There is reference to a license given by Department of Health and Medical Education dated 15th May, 2019 under the Act, which license was valid upto 14th May, 2021.

g) The petitioner claims that despite the fact that the petitioner had been running the Samci Restaurant to the exclusion of respondent No.5, respondent No.5 in connivance with the officials of Food Safety Department succeeded in getting the petitioner‟s license, issued under the Act, transferred in his own name. This was so conveyed to the petitioner in terms of impugned communication dated 2nd December, 2020.

h) The petitioner responded to the aforesaid communication and requested respondent No.4 to withdraw and cancel his order for transfer/grant of license in favour of respondent No.5. Besides the aforesaid grievance projected by the petitioner, it is also the case of the petitioner that the Samci Restaurant run by him had a valid registration under Value Added Tax Act, 2005 [“ VAT”]. He has placed on record, copy of the registration certificate dated 15th April, 2008 issued under VAT Act. However, after coming into force the Central Goods and Services Tax Act (GST), the petitioner‟s concern was also registered under the said Act and a registration certificate in this regard was issued in his favour on 8th December, 2017. It is the grievance of the petitioner that respondent No.5 by abusing his trust and by sheer deception and misrepresentation also succeeded in getting the GST registration issued in favour of the petitioner, cancelled by the respondent No.2. The petitioner states that on coming to know of the cancellation of his registration under GST Act, he immediately applied to the authorities making it clear to them that he had not applied for any cancellation of his registration under GST Act. An application in this regard was also submitted to Deputy Commissioner (Appeals), Sales Tax Department raising allegations that some of the employees of the department, who were in connivance with respondent No.5, had mischievously submitted online application for cancellation of registration under GST Act issued in favour of the petitioner. The petitioner has also made serious allegations of misusing his e-mail ID and creating new ID and password after logging in his e-mail ID. The Deputy Commissioner (Appeals) did not take any action on the application of the petitioner. Neither order of cancellation of his registration was revoked nor was any action taken against respondent No.5. The petitioner even approached the Superintendent of Police Cyber Crime, J&K, Srinagar and requested him to lodge FIR but the petitioner was told to approach the concerned Police Station. The petitioner submitted an application before the Station House Officer, Police Station, Kothibagh, Srinagar but no FIR was registered in the matter.

It is in these background facts, the petitioner has challenged the impugned orders, inter alia, on the following grounds:-

i) The impugned order dated 15th May, 2019 whereunder the license granted to the petitioner for running Samci Restaurant has been revoked and transferred in the name of respondent No.5 is not legally sustainable because firstly, the said order has been obtained by respondent No.5 fraudulently and secondly, there is no provision in the Act conferring power of transfer of the license issued under the Act from one person to another.

ii) That the impugned order dated 15th May, 2019 was passed at the behest of respondent No.5 to the prejudice of the petitioner without affording any opportunity of being heard to the petitioner.

iii) When there is overwhelming evidence that the petitioner alone is entitled to own and run Samci Restaurant, respondent No.4 could not have issued license under the Act in favour of respondent No.5. Respondent No.4 was apprised of the true legal position, yet he chose not to withdraw the license issued in favour of respondent No.5 but instead advised the petitioner to have his name also inserted in the application form as person incharge of operation and responsible for complying with the conditions of license. The entire action of respondent No.4 is, thus, illegal, arbitrary and without any sanction of law.

iv) Order dated 16th April, 2021 is also not sustainable in law, for, the same is a product of misrepresentation and fraud played by respondent No.5 in connivance with authorities. Respondent No.5, after logging in his e-mail ID changed his e-mail ID and password and applied on his behalf for cancellation of GST registration when the fact remains that the petitioner had not submitted any such application. Respondent No.3 despite having been made aware of the manipulation made by respondent No.5 did not restore his registration nor did he take any action against respondent No.5. The appellate authority, which was also approached in the matter, also failed to redress his grievance. The authorities under GST Act have, thus, failed to perform their statutory duty and have, thus, rendered themselves liable to be directed to withdraw the cancellation of GST registration issued in favour of the petitioner and initiate appropriate action against respondent No.5.

Relevant Text of Court’s Order:

15) Under Chapter-II of the Regulations framed by the Food Safety and Standards Authority of India in the exercise of powers conferred by Clause (o) of Sub Section (2) of Section 92 of the Act read with Section 31 of the Act, The Food Business, The Food Business Operator and the Premises are required to be licensed and, therefore, to say that the license under the Act is issued to the person and not to the premises is not the correct position emerging from the reading of the provisions of the Act and the Regulations framed thereunder with regard to licensing and registration of food business.

16) When the case set up by the petitioner is viewed in the context of clear legal position emerging from reading of various provisions of the Act and the Regulations framed thereunder, this Court is not in a position to find any fault with the impugned order dated 2nd December, 2020 passed by the designated officer under the Act. Indisputably, the petitioner as well as respondent No.5 is joint owner in possession of the six storyed building, which houses „Samci Restaurant‟ in its ground floor. The petitioner and respondent No.5 have jointly purchased this building vide sale deed executed on 17th May, 1993. The property is joint and has not been partitioned between the brothers. That being the position, the petitioner as well as respondent No.5 are the joint owners of the entire property including the portion of the ground floor thereof, where Samci Restaurant is housed and established. It cannot be thus disputed that unless both of them apply to the licensing authority for grant of license under the Act, it would not be possible for the designated officer to grant license for running the food business in the premises in favour of one and to the exclusion of the other. It may be true that prior to the year 2019, the Samci Restaurant, as is otherwise evident from the documents placed on record, was being run by the petitioner. Although, the property housing the Samci Restaurant was jointly owned by the petitioner and respondent No.5, yet in view of the cordial relations between two brothers, the petitioner, who was conducting the business had submitted applications to different authorities for seeking permissions and licenses required under law to carry on the food business in the premises. It appears that in the year 2019, somehow the reins of the Samci Restaurant came in the hands of respondent No.5. While he was on the driver‟s seat for running the restaurant, he appears to have approached various authorities including the designated officer under the Act for issuance of license for carrying on the food business in the name of Samci Restaurant. Since he was also owner of the premises along with the petitioner, he successfully applied online for the license and the same was issued by the competent authority after completing requisite formalities including making inspection of the premises to be licensed.

17) The petitioner after becoming aware of the issuance of license under the Act in favour of Respondent No.5 immediately moved an application before the designated officer seeking cancellation of the license issued in favour of respondent No.5 in respect of Samci Restaurant. Respondent No.5 was put on show cause notice by the designated officer, who, after considering the rival stand, was of opinion that since the license had been issued to the premises of Samci Restaurant and not to an individual and, therefore, there was prima facie nothing wrong with the issuance of license sought to be cancelled. The designated officer, however, observed that it would be appropriate and in the interest of both the parties that name of the petitioner was also inserted in the application form as person incharge of operation and responsible for complying the conditions of the license i.e. Food Business Operator.

18) Order of the designated officer/authority is appealable under Section 31(8) of the Act before the Commissioner of Food Safety. However, the petitioner has not availed of the remedy of appeal for the reasons best known to him.

19) Be that as it may, in view of the categoric stand of respondent No.4 that the license, which was issued in favour of respondent No.5 on 15th May, 2019 was valid only upto 14th May, 2021 and same has not been renewed because of the dispute between the petitioner and respondent No.5 in respect of authorized premises, there remains nothing for this Court to adjudicate upon the issue raised by the petitioner in this regard.

20) True it is that if there are more than one owner of the authorized premises (premises to be licensed under the Act) and only one applies and the others object, it would not be possible for the designated authority to issue license qua such premises unless the dispute between the co-sharers is settled.

21) In the instant case, indisputably, petitioner and respondent No.5, who are joint owner of the premises, do not see eye-to-eye with each other. Both have lodged their respective claims before the authorities concerned including the designated authority under the Act for grant of license and registration etc. The licensing authority would not be in a position to grant license under the Act with respect to the premises, ownership and possession whereof is claimed by the petitioner as well as respondent No.5 nor it would be possible for the licensing authority to name any of them to be the Food Business Operator i.e. the person responsible to carry on the food business and comply with the terms and conditions of the license. The decision of the designated authority under the Act not to renew the license in favour of respondent No.5 is, thus, completely in consonance with law. The petitioner and respondent No.5 are required to settle their dispute amicably or through the intervention of Court. Partition between two brothers appears to be a viable solution of the problem which the petitioner and respondent No.5 are facing in respect of running the business of Samci Restaurant.

22) Similarly, on the analogy of what is stated above, the petitioner or for that matter respondent No.5 shall not be entitled to registration under the Goods and Services Tax Act, 2017 (GST). Chapter-VI of the GST deals with registration. In terms of Section 22 of the GST, every supplier shall be liable to be registered under the GST Act in the State or Union Territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees. The term “supplier” is defined under Section 2(105), which reads as under:-

“Supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to goods or services or both supplied”

There is not even an iota of doubt that person running a restaurant and selling the goods and providing restaurant services would be a „Supplier‟ within the meaning of term defined under Section 2(105) of GST Act and, therefore, would require registration under the Act, if aggregate turn over in a financial year exceeds rupees twenty lakh.

23) Unless a person is permitted to run the business in accordance with law and legitimately attains a turnover of more than rupees twenty lakh, he cannot be registered under the GST Act. The turnover must be from a business, which is legitimately run by the supplier.

24) In the instant case, as held above, till dispute between the petitioner and respondent No.5 is settled and two, either jointly apply or property is partitioned and fall in the share of the person applying, no license can be issued by the designated authority under the Act.

25) From the above, this Court arrives at the conclusion that neither the petitioner nor respondent No.5 is entitled to have a license under the Act or registration under the GST Act in his favour to the exclusion of other. They may, if they so desire, bury the hatchet and apply jointly for grant of requisite license and registration for running the food business of Samci Restaurant jointly. If they do so, there would be no difficulty either for the designated authority under the Act or the competent registering authority under the GST Act to grant license and registration for facilitating the running of food business of Samci Restaurant in favour of the petitioner and respondent No5. However, if dispute between the two continues, it would be appropriate for both the authorities to refuse grant of license and registration to them. The petitioner as well as respondent No.5 is well advised to settle their dispute either amicably or through intervention of Court.

26) In the view I have taken, there is hardly any need to advert to the case law cited on both sides. This Court has neither entered in the arena of adjudication of complicated disputed questions of fact nor has it relegated the parties to the remedy of appeal before the authority under the Act and GST Act respectively in view of peculiar facts and circumstances of the case.

27) In view of the aforesaid analysis and in the given facts and circumstances of the case, this writ petition is disposed of by holding that so long as the premises to be licensed under the Act remains under dispute between the petitioner and respondent No.5, the designated authority under the Act is well within its power not to grant or renew the license under the Act in favour of one and to the exclusion of other. The parties need to settle their dispute either amicably or through intervention of the Court. The petitioner as well as respondent No.5 may, however, apply for grant of license jointly and in case they fulfill the requirements of the Act and the Regulations framed thereunder, they shall be granted the requisite license by the designated authority. Registering authority under GST Act shall also act on similar lines.

28) Needless to say, till the dispute is settled between the petitioner and respondent No.5 amicably or through intervention of the Court of competent jurisdiction, neither the designated authority under the Act shall issue the license nor registration shall be accorded under the GST Act by the authority concerned to either the petitioner or to Respondent No.5 in respect of premises “Samci Restaurant”. In the absence of license under the Act, it would not be competent either for the petitioner or for the respondent No.5 to carry on the food business in the premises known as “Samci Restaurant”. The authorities shall take note and act accordingly.

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