Mere Closure of Shop alone not a Ground for Cancellation of GST Registration: Delhi HC [Read Order]

A Division Bench of the Delhi High Court has held that, merely because the petitioner’s shop was found closed, absent anything more, is not a ground for cancellation of petitioner’s Goods and Services Tax (GST) registration, directing the department to restore the registration, while the order of cancellation of registration was set aside.

The petitioner filed the present petition impugning an order dated 23.05.2022 cancelling the petitioner’s GST registration with effect from 05.03.2018. The said order was passed pursuant to a Show Cause Notice dated 19.05.2022.

The SCN indicated that the petitioner’s GST registration was proposed to be cancelled for the following reasons: “In case, Registration has been obtained by means of fraud, wilful misstatement or suppression of facts”.

The petitioner was directed to respond to the SCN within seven working days and to appear before the concerned officer on 23.05.2022. The petitioner’s GST registration was also suspended with effect from the date of issuance of the SCN.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed that, “It is apparent from the above that the SCN is bereft of any material particulars. It neither specifies the fraud alleged to have been committed by the petitioner nor any alleged wilful misstatement made by the petitioner. The SCN also did not mention any facts that were allegedly suppressed by the petitioner.”

“Although, the petitioner was granted seven working days to respond to the SCN, the Proper Officer did not wait for the said period to expire and the impugned order cancelling the petitioner’s GST registration was passed four days later”, the bench further noted.

“The only reasons stated in the impugned order are that the petitioner’s response to the query was not proper; no documentary evidence had been produced by the taxpayer; and none had appeared for personal hearing. The impugned order neither refers to any fraud that was found to have been committed by the petitioner nor mentions any misstatement allegedly made by the petitioner”, stated the division bench while observing that the cancellation of registration was retrospective in nature.

Vineet Bhatia, Aamnaya Jagannath Mishra & Bipin Punia, submitted for the respondents  that although the SCN as well as the impugned order did not specify any reason for cancellation of the petitioner’s GST registration, the respondent’s portal reflected the following reason for cancellation of petitioner’s GST registration: “Party was found existent but non-functioning. Buyer and suppliers found suspicious. Mobile phone number mentioned in registration was not responded by the taxpayer.”

At this instance, the bench remarked that,  “The aforesaid reason, which the respondents seek to rely on, is also cryptic. There is no explanation as to why the buyers and suppliers have been found to be suspicious”.

Thus, the two-judge bench held that, “The impugned order cancelling the petitioner’s GST registration is set aside. The respondents are directed to restore the same forthwith.”

However, it is clarified that this would not preclude the respondents from taking any action against the petitioner in accordance with law, if the petitioner is found to be in violation of any statutory provisions.

To Read the full text of the Order CLICK HERE

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