Registration should not be canceled without specific reason and proper procedure followed

- Sales Tax - Soham Mashruwala

Under the GST Act, the government is canceling the instance of irregular registration. There must be special circumstances to cancel the registration instance. It is mandatory to give a show cause notice with specific reasons before canceling the instance of registration. In this show cause notice it is very necessary to write the event or reason mentioned under section 29. Failure to do so will result in all proceedings being false. In this matter before Hon'ble Bombay High Court Mackersbury India Pvt. Ltd. Writ Petition No. 7506/2023 dt. 3-10-2023 A tricky question came up which is discussed in today's article.

Section 29, Rule 21 and Rule 22

Special circumstances are provided in rule 21 under the authority of section 29. In which the instance of registration has to be cancelled. Rule 22 prescribes the procedure for cancellation of an instance of registration. Accordingly, a show cause notice has to be given in GST Reg 17 format in which the specific reasons have to be written as to which sub-section under section 29 has been violated.

The facts of the case

A show cause notice was issued by the GST Department to the applicant on August 22, 2022 stating that the registration form was obtained fraudulently or knowingly by making a false statement or willfully suppressing the facts and the applicant's number was suspended by the GST Department. Although the applicant uploaded a detailed reply on the GST portal, the prescribed authority canceled the registration instance with retroactive effect on the ground that no authorized person of the applicant was present at the place of business when it was inspected. Moreover, the statement is not given satisfactorily by both the director or the legal representative and the representation is not valid.

Aggrieved by this order, the petitioner filed a first appeal under Section 107 in which he raised an objection that the order was passed without applying brain and the submission was not considered. But aggrieved by the rejection of the application by the Appellate Officer, the petitioner appealed before the Bombay High Court.

Presentation of the applicant

The petitioner has submitted that his business is running and cogent evidence like stock sheet, transport agreement, bill of sale and e-way bill, rent agreement, bank statement, agreement with the transporter has been submitted. All these literatures have been ordered by the Appellate Officer without consideration and further no specific reason has been given in the show cause notice and non application of mind in the proceedings by the Appellate Officer and Area Officer.

Judgment of Bombay High Court

It was specifically noted by the Hon'ble Bombay High Court that the evidence given by the petitioner has not been scrutinized and nothing has been taken into consideration. The Government had no submission as to why the order of the Appellate Authority was correct. The Hon'ble Bombay High Court observed that the correct method of accounting is often not followed so that the Court is often required to give an opinion on the matter. The Hon'ble Court was prepared to order costs but did not do so in the hope that the Government would take a correct approach to the account. Thus, all the notices and that order are cancelled.