The Gujarat High Court ( HC ) held that the order for cancellation of GST registration without determining the amount payable by the assessee is not valid.
Devi Products, the petitioner challenged the legality and validity of the order dated 24.03.2021 passed by respondent No.2 whereby the registration certificate granted to the petitioner under the Central Goods and Service Tax Act, 2017 and Gujarat Goods and Services Tax, 2017 (“GST Acts”) has been cancelled with effect from 01.07.2017. It is averred that the same has been done in violation of the principles of natural justice.
The petitioner is a sole proprietor engaged in the business of trading article brass and was registered with the Gujarat Value Added Tax under the Gujarat Value Added Tax, 2003 and Central Sales Tax Act, 1956. The petitioner failed to file a return of Income on the bonafide belief that there was no requirement to file a return under the GST ACT.
A show cause notice was issued under Rule 22(1) of the GST Rules read with Section 29 of the GST Act whereby the petitioner was informed that his registration was liable to be cancelled because he had not filed the return for a continuous period of six months and he was called upon to file his reply to the notice.
It is also the grievance of the petitioner that his registration has been suspended with immediate effect on 15.03.2021 itself under Rule 21A of the GST Rules and this had been done without recording any reasons. The registration of the petitioner was cancelled by respondent No.2 with effect from 01.07.2017 without recording any particulars or the reasons or the grounds for cancellation.
It was submitted that due to the Covid-19 pandemic, his business was badly affected and in fact, there had been no business post-June, 2020 period. The financial hardship that he suffered from July 2020 led him to believe that there was no requirement for a GST return to file. His registration has been cancelled with effect 01.07.2017 for not filing a return after June 2020.
Justice Sonia Gokani and Justice Sandeep N Bhatt observed that while cancelling the registration, the authority concerned has not even determined the amount payable under such cancellation. Further viewed that the notice which merely stated that any taxpayer other than composition taxpayer has not filed returns for a continuous period of six months would be comprehensible for the assessee to respond to the same as he was also allowed to appear on 23.03.2021.
The Court allowed the petition and quashed the show cause notice and the consequential order cancelling registration with liberty to the respondent to issue a fresh notice with particular reasons incorporating the details and a reasonable opportunity of hearing.
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