for the cancellation, stating the petitioner was non-operational during a field visit on November 24, 2023. However, the petitioner The division bench of the Delhi High Court has set aside the cancellation of GST registration, emphasizing that the Show Cause Notice (SCN) lacked specific allegations and did not propose revoking the GST registration with retrospective effect.
A petition was filed challenging the Show Cause Notice (SCN) dated November 13, 2023, which called for the petitioner to justify why their Goods and Services Tax (GST) registration should not be cancelled. Additionally, the petitioner contested an order dated November 24, 2023, which cancelled the GST registration retrospectively from April 3, 2023.
The petitioner M/s A.P. Enterprises appealed the cancellation order to the Appellate Authority under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act)/Delhi Goods and Services Tax Act, 2017 (DGST Act). However, the appeal was dismissed by an order dated May 30, 2024.
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Though the petitioner could potentially appeal under Section 112 of the CGST Act/DGST Act, the absence of a constituted Goods and Service Tax Tribunal rendered this option unavailable. In light of this, the present petition was entertained.
The only reason cited in the SCN for proposing the cancellation of the GST registration was the alleged violation of Rule 86B under Rule 21(g). The petitioner was instructed to respond within seven working days and appear before the proper officer on November 22, 2023. The petitioner’s GST registration was suspended starting November 13, 2023.
In response to the SCN, the petitioner claimed compliance with Rule 86B of the CGST Rules by depositing 1% of the total sales in the cash ledger and requested the activation of their GST registration to continue business operations.
The GST registration was cancelled by the November 24, 2023, order citing violations of Rule 86B and noting that the firm was found non-operational during a GST report dated November 24, 2023. The cancellation was applied retroactively from April 3, 2023.
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The SCN lacked specific details regarding the allegations, merely referencing Rule 21(g) of the CGST Rules, which pertains to issuing invoices without the supply of goods. The SCN did not provide any details of the allegedly non-compliant invoices or transactions.
The cancellation order introduced an additional reason was not provided with a copy of the report or given a chance to respond to this new allegation. The SCN did not mention the non-operation issue, indicating that the order went beyond the SCN’s scope, violating principles of natural justice.
The petitioner’s appeal was dismissed by the Appellate Authority, even though the petitioner had provided a written explanation and offered an affidavit to pay any outstanding dues related to the selling dealers’ activities.
The petitioner’s counsel, Mr. R.P. Singh, argued that the petitioner was willing to pay any Input Tax Credit if the suppliers had not paid the tax.
Regarding the claim that the petitioner was not found at the principal place of business, the cancellation order mentioned a Field Visit Report, which confirmed that the firm was functioning at the stated address and had not raised invoices during the GST registration suspension.
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The counsel for the respondent, Mr. Singhvi, argued that the cancellation order did not reference the report dated November 24, 2023, which indicated that the petitioner’s firm was non-existent. However, this argument was found to lack merit.
The bench noted that a valid show cause notice must clearly state the reasons for the proposed adverse action, enabling the recipient to respond effectively. The SCN in this case was deemed insufficient for this purpose. Furthermore, the SCN did not suggest cancelling the GST registration with retrospective effect.
The Court, comprising Justice Vibhu Bhakru and Justice Sachin Datta, determined that the petitioner’s GST registration could not be cancelled based on vague allegations and an insufficient SCN. The Court set aside the impugned cancellation order and SCN, directing the respondent to restore the petitioner’s GST registration immediately. It was clarified that this decision does not prevent the respondents from initiating fresh proceedings in accordance with the law if adverse action against the petitioner is deemed necessary. The petition was disposed of accordingly, and all pending applications were also dismissed.
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