The Delhi High Court recently quashed an order cancelling the Goods and Services Tax ( GST ) registration of a business observing that such cancellation cannot be effected on mere allegations without providing adequate reasoning and evidence to the aggrieved Business.
The decision was given in a Writ Petition filed by Rashid Proprietor Of MS Enterprises after receiving a Show-Cause Notice ( SCN ) dated 24th November, 2023 alleging that he was not conducting business from the declared place and was involved in passing on inadmissible Input Tax Credit ( ITC ) without actual supply of goods and services. A prior SCN had been served upon the Petitioner on 18th August 2023 raising concerns about suspicious purchases, but was soon dropped after the petitioner issued their response to the Department on 21st August 2023.
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The impugned SCN raised grounds that the Petitioner does not conduct any business from their declared place of business and that the concerned proprietorship firm was involved in the passing on of inadmissible ITC without conducting the actual supply of goods and services.
The Petitioner had issued a short reply to the Department that the firm was very much in business at the concerned premises and that they had not been involved in the passing on of inadmissible ITC without supplying goods and services, but was to no avail as the Department proceeded to cancel the Petitioner’s GST registration.
Dipak Raj, Kuldeep Mishra, Garima Kumar, Deep Raj and Ayushman appearing for the Petitioner contended that the SCN remained silent on the specific reasons for cancellation and that the physical verification report by the GST Inspector contradicted the allegations raised in the SCN.
Conversely, Piyush Beriwal, Sandip Munian and Jyotsna Vyas appearing for the Government and Revenue retorted that the Petitioner’s reply was insufficient for the Department to decide otherwise.
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The Division Bench constituted by Justice Prathiba M. Singh and Dharmesh Sharma observed that the Central Goods and Services Tax ( CGST ) Letter dated 22nd November, 2023 relied upon by the Department to support the SCN was not served upon the Petitioner prior to the cancellation of GST registration.
In the light of such an event, the Bench set aside the cancellation of GST registration and ordered that the concerned letter be furnished to the Petitioner within four weeks while directing that the Petitioner be given due opportunity for hearing before any order is passed.
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