Recent case laws related to revocation of the cancelled GST Registration

GST registration can be cancelled in the following situation under GST laws

1. Voluntary cancellation by the taxpayer
2. In case of death of a taxpayer, the cancellation can be applied by his legal heirs
3. Registration cancellation of tax officer

Legal provisions regarding "cancellation or suspension of registration" and "revocation of cancellation" has been given under various sections and rules of GST Laws. Some of the relevant sections, Rules and Circulars are listed hereunder for the benefit of readers:

1. Section 29 and 30 of CGST Act, 2017,
2. Rules 20, 21, 21A, 22, 23, 44 and 81 of the CGST Rules, 2017
3. Circular no. 145/01/2021 - GST dated 11.02.2021 - SOP for implementation of Rule 21A(2A) of CGST Rules, 2017.
4. Circular no. 129/48/2019 - GST dated 24.12.2019 - SOP to be followed in case of non-filers of returns.
5. Circular no. 69/43/2018 - GST dated 26.10.2018 - Processing of applications for cancellation of registration submitted in Form GST REG - 16. (Voluntary cancellation by the taxpayer).
6. Registration advisory no. 07/2022 dated 23.03.2022 - Introduction of restoration of cancelled registration based on appellate order.
7. Circular 148/04/2021 - GST dated 18.05.2021 - SOP for implementation of the provision of extension of time limit to apply for revocation of cancellation of registration u/s 30 of the CGST Act and Rule 23 of the CGST Rules.
8. Circular no. 158/14/2021 - GST dated 06.09.2021 - Clarification regarding extension of time limit to apply for revocation of cancellation of registration in view of Notification 34/2021 - CT dated 29.08.2021.

It has been observed that many times, registration of the taxpayers are cancelled or suspended by tax officers without following principles of natural justice, i.e., without giving an opportunity of hearing, by issuing vague SCN or order of cancellation. Many times, cancellation orders issued by tax officers are without specifying the reasons for cancellation.

It is well-settled law in India that the orders passed by quasi-judicial authorities must be a speaking order. Speaking order is an order that speaks for itself. In the case of Siemens Engg & Manufacturing Company v. UOI, (1976, SC 1785) the Supreme Court held that where an authority, in the exercise of a quasi-judicial function, makes an order, it must record its reasons.

In this article, we are discussing some of the recent decisions delivered by the Courts in GST law

Aggarwal Dyeing & Printing Works v. State of Gujarat [SCA no. 18860 of 2021 dated 24.02.2022]

The applicant had not filed GST returns for a continuous period of 6 months. An SCN issued by respondent-Asst. Commissioner as to why his registration should not be cancelled for non-filing of returns for a continuous period of 6 months. The applicant didn't file any reply to the SCN. The Asst. Commissioner passed an ex parte order dated 30.09.2018 and cancelled GST registration of the applicant, with effect from the date of registration itself.

The applicant filed an appeal u/s 107 of the CGST Act, 2017 on 17.07.2021, which was dismissed by the appellate authority, as the appeal was filed with a delay of almost 2 years from the date of order of cancellation of registration. The applicant filed a writ petition in the Hon'ble Gujarat High Court as per Article 226 of the Constitution of India.

The contention of the writ applicant was that he had lack of knowledge of the new tax regime. It was also stated by the applicant that because of lack of knowledge about the filing of returns, more particularly, when the turnover was "NIL", under the bona fide belief that no return is required to be tendered, the same was not submitted.

The writ applicant, inter alia, challenged the SCN and order of cancellation of registration

Gujarat HC held that "We take notice of the fact that the SCN at page: 19 (Annexure: B) is as vague as anything. The order cancelling the registration is at page: 20 is more vague than the SCN."

"The impugned order is not only non-speaking, but cryptic in nature, and the reason of cancellation is not decipherable therefrom. Thus, the basic principles of natural justice are violated and therefore, the impugned order needs to be quashed."

Suguna Cutpiece Centre v. Appellate Dy. Commissioner [W.P. No. 25048 of 2021 with other petitions, dated 31.01.2022

Various writ petitions were disposed of by the Hon'ble Madras High Court through common order.

"The provisions of the GST Act cannot be interpreted in a manner, so as to debar as the assessee, either from obtaining registration or reviving the cancelled registration. Such interpretation would be not only contrary to Article 19(1)(g), but will also be in violation of Article 14 and 21."

Bright Star Plastic Industries v. Addl. Commissioner of Central Tax (Appeals) & Others [W.P. (C) No. 15265 of 2021 dated 04.10.2021]

In this case, the registration of the petitioner was cancelled on the ground that the petitioner has claimed ITC on the basis of fake invoices which were issued by a supplier who is non-existent. The clarification submitted by the petitioner was not satisfactory. Petitioner filed an appeal against the order of cancellation u/s 107 of the CGST Act, 2017, which was rejected. Hence, the petitioner filed a writ to the High Court of Orissa.

Hon'ble Orissa High Court held that on the dates the petitioner entered into purchase transactions, the GST registration of the selling dealer was effective, and it was rejected at a later date. Therefore, on the date the purchases took place, there was no means for the petitioner to know that the selling dealer was non-existent. The Department has failed to show that petitioner as a purchasing dealer deliberately availed ITC knowing that the supplier was non-existent. The Department also failed to show that purchasing dealer and selling dealer acted in connivance to defraud the Revenue.

In view of the above, the impugned orders are set aside, and Department is directed to restore the petitioner's registration.

Galaxy Mechanical Engineering Equipments Private Limited v. Asst. Commissioner, Bally, SGST & Others [W.P.A. No. 2857 of 2022 dated 03 March 2022]

It was held in this case by the High Court of Calcutta that the order of cancellation of registration, and suspending the registration of the petitioner is a non-speaking order since no reason has been given in the impugned order and therefore, not sustainable in law and accordingly the impugned order of cancellation of registration of the petitioner is set aside.

Similarly, in the matter of Vimal Yashwantgiri Goswami v. State of Gujarat [SCA no. 15508 of 2020 dated 10.12.2020], order of cancellation of registration quashed by Hon'ble Gujarat High Court on the ground that the order is a non-speaking order without application of mind.

Phoenix Rubbers v. CTO [W.P.(C) No. 35159 of 2019 (T) dated 03.02.2020]

In this case, due to the financial crisis, the petitioner firm defaulted on filing returns from May 2019 onwards. The responded department issued notice on 13.11.2019 to the petitioner proposing to cancel the registration u/s 29(2)(c) of the Act on account of the alleged non-filing of the returns for a continuous period of 6 month's period. Thereafter, the registration of the petitioner was cancelled u/s 29(2)(c) of the CGST Act. Before issuing the order of cancellation of registration the petitioner had filed return for May 2019 month. Petitioner pointed out that the impugned order of cancellation of registration was issued on 10.12.2019, while on that date the petitioner had filed returns for May 2019, and due to that there is no continuous default of 6 months as is required under clause (c) of Section 29(2) of the Act.

The Kerala High Court held that for exercising powers u/s 29(2)(c), the condition of 6 months of continuous default should be fulfilled both at the time of issuance of notice and also at the time of passing the order of cancellation of registration. In view of that impugned cancellation order is illegal and ultra vires, and is quashed.

Ashwani Agarwal v. UOI [Writ Tax No. 451 of 2020 dated 07.09.2020]

In this case, an SCN for cancellation of registration was issued on 14.02.2020 to the petitioner. in response to which on 25.02.2020, a counsel for the petitioner had put in appearance in the hope that the details on the basis of which show cause notice has been issued would be made available to the petitioner's counsel. Lastly, it is submitted that on 14.04.2019, the order impugned has been passed by the Superintendent Kanpur Sector 12, cancelling the registration on the following reasons: - "Since taxpayer not attended PH nor submitted any reply hence cancellation approved".

Ld. counsel for the petitioner has argued that in the said order dated 14.04.2020, cancelling the registration of the petitioner, the officer concerned has in the very beginning of the same started with the order stating that the same has a reference to his reply dated 25.05.2020 in response to the notice of show cause dated 14.02.2020. Ld. counsel has argued that the reason for cancellation mentions that the taxpayer has not attended PH nor submitted any reply and hence cancellation has been approved which is totally contrary to the fact as stated in the same order itself, whereby it mentions that the concerned officer has taken reference of reply dated 25.02.2020 of the petitioner in response to the show cause notice dated 14.02.2020. It is argued that the order is on the face of it arbitrary and contrary to the specific reference in the order itself as it states that the petitioner has not submitted any reply and as such the cancellation of the registration was approved and thus deserves to be set aside.

The writ petition was accordingly allowed and the order dated 14.04.2020 was set aside.

Om Trading Company v. Dy Commissioner of State Tax [W.A. No. 1823 of 2019 dated 07.04.2021]

In this matter, an SCN dated 05.11.2018 was issued to the petitioner under rule 21(b) of the CGST Rules, which mandates that the registration of the person is liable to be cancelled if the person issued invoice or bill without supply of goods or services in violation of the provisions of the Act or the rules made thereunder. It was stated in the SCN that the appellant is carrying on the business only on paper and the E-way bill are downloaded but the concerned vehicles are not transporting any goods in actual.

Appellant failed to prove his e-way transaction details; his registration was cancelled by order dated 09.01.2019. Being aggrieved, the appellant preferred an appeal u/s 107 of the Act, which was dismissed by the Appellate Authority. Being aggrieved, the appellant had filed a writ petition before this court bearing W.P. No. 9885/2019, whereby the orders passed by the Dy. Commissioner of State Tax, as well as Appellate Authority, has been affirmed. Being aggrieved, the present Writ Appeal has been filed.

The Division Bench of M.P. High Court held that the detailed enquiry was conducted before passing the impugned RC registration cancellation order, in which it was found that the appellant has failed to prove E-way bill transaction details. A proper opportunity of hearing was afforded to the appellant, and no cogent documentary evidence is available to justify the stand taken by the appellant. In view of that, the writ appeal fails and is hereby dismissed.

Disclaimer: The contents of this article are solely for information and knowledge and do not constitute any professional advice or recommendation. The author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.