Transaction cannot be suspected when GST registration of other end dealer is cancelled with retrospective effect

The Calcutta High Court has ruled that a business transaction cannot be deemed suspicious solely because the other party's GST registration was cancelled retrospectively. The court found that the Revenue Department's order cancelling the assessee's GST registration was a non-speaking order, lacking independent findings against the assessee. The matter was remanded for fresh consideration, requiring an opportunity for a personal hearing.

The Hon’ble Calcutta High Court in M/s Shraddha Overseas Private Limited & Anr. v. The Assistant Commissioner of State Tax [M.A.T No.1860 of 2022 dated December 16, 2022] set aside the order passed by the Revenue Department cancelling Goods and Services Tax ("GST") Registrations of the assessee on the grounds of suspicion. Held that, the transaction cannot be suspected merely on the grounds that the GSTRegistration of the other-end dealer was cancelled with retrospective effect.

Facts

M/s Shraddha Overseas Private Limited ("the Appellant") entered into a business transaction of transporting the goods with M/s Suraj Enterprises in October, 2018. The tax authorities of Utaganda conducted two separate enquiries in the premises of M/s. Suraj Enterprise on November 14, 2019 and February 17, 2020 and concluded that M/s Suraj Enterprises was a no existing dealer and had no registration. Thus, a doubt had arisen in the mind of the Revenue Department ("the Respondent") with regard to the genuineness of the transaction between the Appellant and M/s Suraj Enterprises.

The Appellant stated that in the Show Cause Notice ("SCN") issued to M/s. Suraj Enterprise, there was no such allegation against the Appellant and though several grounds were raised by the Respondent, none of the grounds were considered against the Appellant. 

The Appellant submitted that, to conclude that the other end dealer is a non-existing dealer, there should be material to show that on the date when the Appellant had transaction with them, there was no valid registration. Also, if the cancellation of the registration of the other end dealer is by way of retrospective cancellation, then the question would be as to whether it would affect the transaction done by the Appellant, more particularly when the Appellant have been able to show that the payments for the transaction have been done through banking challans.

Hence, this petition has been filed challenging an order passed by the learned Single Bench declining to grant interim relief sought. 

Issue

Whether the cancellation of registration of the other end dealer by retrospective cancellation will affect their transaction with the Appellant?

Held

The Hon’ble Calcutta High Court in M.A.T No.1860 of 2022 held as under:

• •    Opined that, the order passed by the Respondent is a non-speaking order in the sense that there is no independent finding rendered by the Respondent qua the allegation against the Appellant.
• •    Noted that, the other end dealer’s registration was cancelled with retrospective effect. 
• •    Remanded the matter back to the Respondent to make fresh consideration after affording an opportunity of personal hearing to the Appellant.