In a recent ruling, the Allahabad High Court directed the tax authorities to provide supporting documents to the petitioner. This decision was made due to tax authorities issuing a Show Cause Notice on the cancellation of GST registration without proper details.
A raid was conducted at the principal business location of the petitioner, Baba Industries, situated at Dewa Road, Barethi, Gadia, Barabanki. The premises consisted of an 80-square-foot space that was allegedly dealing only in FMCG ( Fast Moving Consumer Goods ) products.
During the search, the authorities found discrepancies in business activities, such as mismatches between inward and outward supplies and the existence of fake transactions for generating fraudulent Input Tax Credits (ITCs).
Following this, the tax authorities issued a show-cause notice on March 22, 2024, suspending Baba Industries’ GST registration. The notice alleged fraud and misrepresentation, but it failed to provide detailed reasons or attach supporting documents to substantiate the allegations.
Complete Draft Replies of GST ITC Related Notices, Click Here
The petitioner submitted a reply requesting access to the documents referred to in the show-cause notice, but no such documents were provided. The petitioner filed a petition challenging the Show cause notice.
The petitioner’s counsel argued that no reasons or specific details had been provided in the show-cause notice to support the cancellation and the respondent issued a show-cause notice and suspended the GST registration, allegedly without fulfilling statutory obligations like providing reasons and documentation.
The petitioner’s counsel relied on the Delhi High Court ruling, which had set aside a GST registration cancellation due to similar issues of insufficient details in the show-cause notice.
On the contrary, the department counsel claimed that inspections at the petitioner’s business location showed no real trading in materials like iron or paper scrap. Evidence from the raid suggested that the petitioner’s operations were fraudulent, primarily for generating fake ITCs.
The respondent‘s counsel maintained that issuing the show-cause notice and suspension under Section 29(2) of the Central Goods and Services Tax Act, 2017, was valid.
Complete Draft Replies of GST ITC Related Notices, Click Here
The bench comprising Justice Sangeeta Chandra, J., and Justice Brij Raj Singh, J. noted that the case the petitioner relied on was challenging final order but herein the petitioner’s case, the matter has yet to be adjudicated.
The court observed that despite the claims made in the notice, the respondent failed to supply the necessary documents referred to in the notice. Therefore, the court directed the respondent to provide all relevant documents mentioned in the show-cause notice within ten days. The petitioner’s writ petition was disposed of with directions.
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