TMI Blog2022 (8) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fundamental rights of carrying business and in a casual manner in which the show-cause notice has been issued clearly demonstrates the need for the State to give the quasi-adjudicatory function to persons who have judicially trained mind, which on the face of it absent in the present case. The order of cancellation of the registration on the ground that no reply was given is equally lacking in terms of a quasi-judicial fervor as the same does not contain any reasoning whatsoever. The show-cause notice issued after the petitioner had filed an application for revoking the cancellation of registration also smacks of lack of judicial training by the quasi-adjudicatory authorities under the GST Act as it merely shows that no satisfactory explanation was received within the prescribed time. The order rejecting the application for revocation of cancellation of registration takes the matter to the height of arbitrariness inasmuch as no reasons are recorded as to why the request for revocation of cancellation of registration could not be accepted and discloses absence of application of mind with regard to the averments contained in the application filed by the petitioner for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishment under the VAT Act and the CST Act for the assessment year 2017-18. The petitioner claims to be carrying out the business from the registered place of business as registered with the GST Authorities and are paying taxes. A show-cause notice dated 08.05.2020 was issued to the petitioner under Rule 22(1) of the GST Rules whereby it was alleged that on the basis of the information which has come to the notice of the Assistant Commissioner it appears that your registration is liable to be cancelled for the following reasons: 1. Taxpayer found Non-functioning/Not Existing at the Principal Place of Business 4. Subsequent thereto, an order came to passed on 22.05.2020 (Annexure - 12) wherein the following has been recorded: This has reference to your reply dated 17/05/2020 in response to the notice to show cause dated 08/05/2020 Whereas no reply to notice to show cause has been submitted. The effective date of cancellation of your registration is 22/05/2020. 5. The petitioner while trying to upload his E-Way Bill came to know that the registration of the petitioner - firm has been cancelled on 08.05.2020, as such, the petitioner moved an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat an inspection was carried out on 20.05.2020 in respect of the premises of the petitioner and on the site in question, the committee comprising of three persons did not find any activity pertaining to the firm over the property in question. It also records that the partner of the firm Shri Arun Jindal was called on phone but he could not give any clear reply. It was also recorded that in the said inspection at the given place of interest, no stocks or commercial activity was found and the partners of the firm did not co-operate in the inspection. It also records that in the inspection report another firm in the name of M/s Star Enterprises, 24 Gandhi Nagar, Sitapur with another GST number was found working and on the spot, the owner of the firm Mr. Imran was found and on the said place the said firm M/s Star Enterprises was found to be working. The said report, which was relied upon, also referred to the license from the Forest Department. It was also recorded that in the inspection report there was a mention that over the property bearing Gata No.56, BKT, Lucknow, the said firm M/s Star Enterprises had taken the property on lease from one Shri Arun Jindal and nothing was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no commercial activities were being carried out at the place of registration on the other hand the CGST as well as the UP GST Authorities have alleged shortage of finished goods and seizure of the goods on account of expired E-Way bill respectively. He draws my attention to Section 29 of the Act, which provides for cancellation of registration and on the grounds on which the same can be done. Section 29 of the Act is being quoted hereinbelow: Section 29: Cancellation or Suspension of Registration.- (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where, - (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or (b) there is any change in the constitution of the business; or (c) the taxable person is no longer liable to be registered under Section 22 or Section 24 or intends to opt out of the registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, whichever is higher, calculated in such manner as may be prescribed: Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher. (6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed. 11. Learned counsel for the petitioner argues that none of the grounds as contained in Section 29 of the Act were alleged or established against the petitioner. He has drawn my attention to the judgment of the Hon'ble Supreme Court in the case of Oryx Fisheries Private Limited v. Union of India and Ors. - (2010) 13 SCC 427 wherein the requirements and reasoning of a show-cause notice have been explained in detail by the Hon'ble Supreme Court. 12. He next relies upon the judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bangalore v. Brindavan Beverages (P) Ltd. and Ors. - (2007) 5 SCC 338 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the submissions made at the Bar, this Court is to consider whether the action taken against the petitioner in respect of cancellation satisfies the test of the requirement of Section 29 of the Act or not? 18. A perusal of the show-cause notice at the first instance, clearly depicts the opaqueness of the allegations levelled against the petitioner, which were only to the ground that ''tax payer found non-functioning/non-existing at the principal place of business'. The said show-cause notice did not propose to rely upon any report or any inquiry conducted to form the opinion and on what basis was the allegation levelled that the tax payer was found non-functioning; it does not indicate as to when the inspection was carried. A vague show-cause notice without any allegation or proposed evidence against the petitioner, clearly is violative of principles of administrative justice. Cancellation of registration is a serious consequence affecting the fundamental rights of carrying business and in a casual manner in which the show-cause notice has been issued clearly demonstrates the need for the State to give the quasi-adjudicatory function to persons who have judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the other hand there is justification to the order passed and impugned in the present petition. 22. Finding the orders contrary to the mandate of Section 29 and 30 of the Act as well as the principles of adjudication by the quasi-judicial authorities, the orders impugned dated 18.01.2021 (Annexure - 19) and 15.07.2020 (Annexure - 16) cannot be sustained and are set aside. 23. The registration of the petitioner shall be renewed forthwith. 24. In the present case, the arbitrary exercise of power cancelling the registration in the manner in which it has been done has not only adversely affected the petitioner, but has also adversely affected the revenues that could have flown to the coffers of GST in case the petitioner was permitted to carry out the commercial activities. The actions are clearly not in consonance with the ease of doing business, which is being promoted at all levels. For the manner in which the petitioner has been harassed since 20.05.2020, the State Government is liable to pay a cost of Rs.50,000/- to the petitioner. The said cost of Rs.50,000/- shall be paid to the petitioner within a period of two months, failing with the petitioner shall be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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