2025 (5) TMI 1730 - HC - GST

Cancellation of the GST Registration retrospectively - ITC blocking - non-existent firm during physical verification - issuance of show cause notice - appealable order under Section 107 - HELD THAT - This Court is of the opinion that the impugned order is clearly an appealable order under Section 107 of the Central Goods and Service Tax Act 2017. The Petitioner s stand that the application for revocation of GST Registration dated 11th March 2025 was filed prior to the issuance of the show cause notice dated 2nd April 2025 would not be correct inasmuch as the letter received from the Anti Evasion Commissionerate is dated 7th March 2025 and it appears that the Petitioner may have obviously learnt of the said physical inspection and has thereafter applied for cancellation on 11th March 2025. Thus this Court is of the opinion that this petition does not merit any interference of this Court and a challenge if any shall be taken up by the Petitioner before the appellate authority in appeal. Accordingly the Petitioner is granted time till 10th July 2025 to file an appeal before the appellate authority under Section 107 of the Central Goods and Service Tax Act 2017. If the appeal is filed by the Petitioner before 10th July 2025 the same shall be adjudicated upon merits and shall not be dismissed on the ground of limitation. It is also made clear that the observations made by this Court in the present petition shall have no bearing upon the decision of the appellate authority. All rights and remedies of both parties are left open. At request Respondent No. 2 - Deputy Commissioner Zone-5 State Goods and Service Tax Act Department of Trade Taxes Delhi is deleted from the array of parties. The petition is disposed of in the above terms. Pending application(s) if any also stand disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned order dated 17th April, 2025 cancelling the GST registration of the Petitioner is sustainable, given that the Petitioner had earlier applied for cancellation of the same registration on 11th March, 2025 and the registration was purportedly cancelled with effect from 21st March, 2025.

- Whether the Department was justified in revoking the earlier cancellation and issuing a show cause notice dated 2nd April, 2025 based on inputs from the Anti-Evasion Commissionerate regarding the Petitioner being a non-existent firm.

- Whether the Petitioner's challenge to the impugned order is maintainable before this Court or whether the remedy lies before the appellate authority under Section 107 of the Central Goods and Services Tax Act, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the impugned cancellation order in light of the Petitioner's prior cancellation application and order

The Petitioner contended that since it had filed an application for cancellation of GST registration on 11th March, 2025 and the registration was cancelled effective 21st March, 2025 (communicated on 28th March, 2025), the subsequent cancellation order dated 17th April, 2025 was not sustainable. The Petitioner argued that the registration was already cancelled and could not be cancelled again.

The Court examined the timeline and noted that the Department had received a communication from the Anti-Evasion Commissionerate dated 7th March, 2025, stating that the Petitioner was found to be a non-existent firm during physical verification. This communication predated the Petitioner's application for cancellation.

The Court reasoned that the Petitioner, upon learning of the physical verification and the adverse findings, may have filed the cancellation application on 11th March, 2025 in response to the Department's investigation. Thus, the cancellation order dated 21st March, 2025 was not an independent or voluntary cancellation but was filed after the adverse inputs were known.

Accordingly, the Court held that the impugned order dated 17th April, 2025 cancelling the registration on the basis of the show cause notice issued on 2nd April, 2025 was not rendered invalid merely because a prior cancellation order existed. The Department was entitled to revoke or reconsider the cancellation in light of the findings from the Anti-Evasion Commissionerate.

Issue 2: Justification for revocation of cancellation and issuance of show cause notice

The Department relied on the letter from the Anti-Evasion Commissionerate, CGST (West) dated 7th March, 2025, which indicated that the Petitioner was a non-existent firm during physical verification. Based on this, the Department issued a show cause notice dated 2nd April, 2025 proposing cancellation of registration and blocking of Input Tax Credit (ITC), followed by the impugned cancellation order.

The Court accepted that the Department's action was based on material received from the Anti-Evasion Commissionerate and was within its jurisdiction to investigate and take action against non-compliant entities. The issuance of the show cause notice was thus justified as a procedural requirement before passing the cancellation order.

The Court did not delve into the merits of the Anti-Evasion Commissionerate's findings but recognized that such findings formed the basis for the Department's action, which could be challenged before the appellate authority.

Issue 3: Appropriate forum for challenge to the impugned order

The Court observed that the impugned order cancelling the GST registration is an appealable order under Section 107 of the Central Goods and Services Tax Act, 2017. The Petitioner's challenge before the High Court under Articles 226 and 227 of the Constitution was not the proper remedy in the circumstances.

The Court noted that the Petitioner had not exhausted the statutory remedy of appeal before the designated appellate authority. It emphasized that the Petitioner should approach the appellate authority for adjudication of the dispute on merits.

In this context, the Court granted the Petitioner time until 10th July, 2025 to file an appeal before the appellate authority and directed that if such appeal is filed within the stipulated time, it must be adjudicated on merits without dismissal on limitation grounds.

The Court further clarified that its observations in the present petition would not prejudice the appellate authority's decision and all rights and remedies of both parties remain open.

3. SIGNIFICANT HOLDINGS

- "The impugned order is clearly an appealable order under Section 107 of the Central Goods and Service Tax Act, 2017."

- "The Petitioner's stand that the application for revocation of GST Registration dated 11th March, 2025 was filed prior to the issuance of the show cause notice dated 2nd April, 2025 would not be correct, inasmuch as, the letter received from the Anti Evasion Commissionerate is dated 7th March, 2025 and it appears that the Petitioner may have obviously learnt of the said physical inspection and has thereafter applied for cancellation on 11th March, 2025."

- "This petition does not merit any interference of this Court and a challenge, if any, shall be taken up by the Petitioner before the appellate authority in appeal."

- The Court granted relief by extending the time to file an appeal and ordered that the appeal shall be adjudicated on merits and not dismissed on limitation grounds if filed within the extended time.

- The Court clarified that its observations are without prejudice to the rights of the parties and the appellate authority's jurisdiction.