GST Dept Cancels Registration for Fake ITC by Supplier: AP HC directs to seek Remedy u/s 30 [Read Order]

In a recent ruling, the Andhra Pradesh High Court addressed a matter where the GST registration of a business was cancelled on the grounds that the suppliers had availed of Input Tax Credit ( ITC ) without the actual receipt of goods and had passed on this credit to the petitioner without supplying goods.

The petitioner, a proprietary concern involved in the purchase and sale of iron scrap, argued that the cancellation was unjustified as they had regularly filed monthly returns and made tax payments as per the GST Act, 2017, after availing of ITC.

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The petitioner received a show cause notice from the GST department on June 22, 2023, which alleged that the suppliers had claimed ITC fraudulently. Despite the petitioner's objections, which pointed out that the reports relied upon by the GST authorities were not shared with them, the respondent proceeded to cancel the petitioner's GST registration on July 15, 2023. The petitioner contended that this cancellation was in violation of natural justice principles, as they were not given access to the evidence against them.

In response, the government counsel argued that the petitioner had an alternative remedy available under Section 30 of the GST Act to apply for the revocation of the cancellation or to appeal against the cancellation order under Section 107 of the Act.

Referring to the Supreme court’s decision in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, the court observed that the apex court held that in certain contingencies viz., when writ petition is filed for enforcement of fundamental rights, or where there has been a violation of principles of natural justice or when the proceedings impugned are wholly without jurisdiction or the vires of an act is challenged, the writ petition could be maintainable in spite of availability of alternative remedy.

In this case, the bench of Justices U. Durga Prasad Yadav and A V Ravindra Babu examined the petitioner's claim that their writ petition was grounded in a violation of natural justice, arguing that the show cause notice issued on June 22, 2023, was insufficiently detailed, particularly regarding the non-existent taxpayers allegedly involved in issuing bogus tax invoices to the petitioner.

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After reviewing the evidence, the court determined that the respondent had indeed included the necessary details in the notice. As such, the court disagreed with the petitioner's assertion that the notice was inadequate and did not find a violation of natural justice.

The court also observed that the petitioner had an alternative remedy available to challenge the impugned order, which they had not utilised. Consequently, the court concluded that the writ petition did not warrant any favourable order. However, considering the significant impact of the GST registration cancellation on the petitioner's business operations, the court allowed the petitioner another opportunity to challenge the order.

The writ petition was dismissed, but the petitioner was granted the option to either file an application under Section 30 of the GST Act for revocation of the cancellation or appeal the order within 15 days of receiving the court's decision. The court also instructed that, should the petitioner choose to proceed, the relevant authority must issue a decision on the merits of the case after a hearing for both parties.

To Read the full text of the Order CLICK HERE

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