In an assessee-friendly ruling, the Allahabad High Court has imposed a cost of Rs. 50,000 on the GST department finding that the registration of the assessee was arbitrarily cancelled. Noting that this kind of actions not only affects the assessee, but the same is also causing adverse effects on the revenue as it is not in consonance with the ease of doing business.
Justice Pankaj Bhatia was hearing a petition by Drs Wood Products Lucknow wherein the petitioner-assessee challenged an order cancelling GST registration without granting an opportunity to defend the same. It was contended that no reasons are recorded as to why the request for revocation of cancellation of registration could not be accepted. In response to the said show-cause notice, the petitioner moved an application seeking 15 days extension of time to give a reply in view of the marriage of the daughter of the petitioner scheduled on 24.06.2020. however, the request was rejected.
Noting the action as arbitrary, the Court observed that “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 revocation of cancellation of registration. It is also not clear as to why the request of the petitioner to adjourn the matter because of the marriage of his daughter was not even considered prior to passing of the rejection order dated 15.07.2020.”
Concluding the order, the Court held that “I have no hesitation in recording that the said authorities while passing the order impugned have miserably failed to act in the light of the spirit of the GST Act. The stand of the Central Government before this Court is equally not appreciable as on the one hand they are alleging that excess goods were found for which the petitioner is liable to pay duty and on the other handIn 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 to file a contempt petition.”
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