A Single Bench of the Allahabad High Court has recently quashed and set aside the cancellation of Goods and Services Tax (GST) registration done on the sole ground of the firm being alleged to be bogus.
The contention of the Counsel for the petitioner is that the petitioner is a registered Proprietorship firm and is doing the business in accordance with the Act and Rules. On 15.12.2020, the petitioner changed its business address and in this regard, the petitioner moved an amendment application, which was approved by the department on 09.02.2021.
On 03.01.2021, a survey was conducted by the department at the earlier place of business and it was found that the firm is not existing/ running from the registered place. It was stated by the petitioner that a show cause notice was issued on 11.02.2021 (Annexure No.3) wherein it was alleged that the registration is liable to be canceled on the basis of information received from STF that the firm is not existing/ running at the registered place.
It is stated that in absence of the reply to the show cause notice dated 11.02.2021, the registration of the firm was canceled vide order dated 31.03.2021 canceling the registration on the ground that as per the information received, the firm was indulged in availing fake ITC credit
from a bogus firm.
The contention of the Counsel for the petitioner was that the cancellation of the registration can be resorted to only when the conditions specified in sub-section 2 of Section 29 of the GST Act are attracted.
The Counsel for the petitioner, Pranjal Shukla argued that in none of the clauses as enumerated in Section 29(2) and as recorded above, non-availing ITC credit as is alleged against the petitioner, can be a ground for cancellation. It was further argued that in the show cause notice, the only allegation leveled was that nothing was found in the premises in question.
The Counsel for the respondent argued that at the time of survey, nothing was found in the firm in question and the approval relied upon by the petitioner was subsequent to the survey, as such, he argues that the same is after thought.
The Single Bench of Justice Pankaj Bhatia observed that, “Be that as it may, from the perusal of the order passed in appeal as well as the order canceling the registration, it is apparent that the respondents have committed error while deciding the issue on the ground that several firms were availing wrong ITC credit and were essentially bogus firms.
It was further noted that, “in the case of Apparent Marketing Private Limited (Supra) has already dealt with the said issue and has recorded that once registration is granted, the same could be canceled only in terms of the conditions prescribed under Section 29(2) and allegedly being a bogus firm is not a ground enumerated under Section 29(2).”
The Allahabad High Court thus held that, “following the said judgment and coupled with the fact that the respondents themselves have initiated proceedings against the firm under Section 74, the order rejecting the application for revocation was a wrong exercise of power by the department. The appellate order is equally bad, inasmuch as, no such ground was mentioned before passing the order of cancellation and, thus the impugned orders 17.05.2021 and 14.09.2021 are set aside.”
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