Alaknanda Steel v. Commissioner of Delhi Goods and Services Tax

1. Issue notice.

2. The learned counsel for the respondents accepts notice.

3. The petitioner has filed the present petition, inter alia, impugning an order dated 09.06.2023 whereby the petitioner’s application for the cancellation of his GST registration was rejected. The petitioner also impugns the show cause notice (hereafter the impugned SCN) issued on the same date, that is on 09.06.2023, calling upon the petitioner to show cause as to why its GST registration not be cancelled and the order dated 30.06.2023 (hereafter the impugned cancellation order) was passed pursuant to the impugned SCN. In terms of the impugned cancellation order, the petitioner’s GST registration was cancelled ab initio.

4. The petitioner was registered with GST authorities and was assigned the Goods and Services Tax Identification Number (GSTIN): No.07AAMPG7549L1Z[4] with effect from 01.07.2017. The petitioner claims that he discontinued his business and accordingly made an application for cancellation of his GST registration with effect from 20.05.2023.

5. Pursuant to the aforesaid application, the proper officer issued the notice dated 23.05.2024 calling upon the petitioner to provide the reconciliation statement in respect of his returns; upload the proof of permanent future address; furnish the undertaking that he would pay the GST dues and liabilities in future; and confirm that no inquiry was pending against the petitioner. In addition, the petitioner was also asked to make his firm “Aadhaar Authenticated”.

6. Thereafter, the petitioner’s application for cancellation of its GST registration dated 20.05.2023 was rejected by the impugned order. However, on the same date of the impugned order, the proper office issued the impugned SCN stating that the petitioner’s GST registration was liable to be cancelled for the following reasons:- “1 Rule 21(e)-person avails ITC in violation of the provisions of section 16 of the Act or the rules made thereunder”

7. The petitioner was called upon to furnish a reply to the impugned SCN within the period of seven working days from the date of service of the impugned SCN and was also directed to appear before the concerned proper officer at an appointed date and time. However, no date or time was indicated in the impugned SCN. Additionally, the petitioner’s GST registration was also suspended with effect from 09.06.2023.

8. Thereafter, the proper officer issued the impugned order and cancelled the petitioner’s GST registration with retrospective effect from 01.07.2017.

9. The reasons for cancellation as set out in the impugned order are identical to that as stated in the impugned SCN.

10. The petitioner also states that in the similar fashion, the petitioner’s GST registration was cancelled on an earlier occasion by an order dated 07.07.2020. The petitioner had applied for the revocation of cancellation of his GST registration which was restored by an order dated 02.09.2022.

11. Since, the petitioner states that he has discontinued his business, subject to verifying the correctness of the aforesaid assertion, his GST registration is liable to be cancelled.

12. We find no fault with the proper officer in demanding the documents for future correspondence. However, the petitioner’s application for cancellation of his GST registration cannot be withheld on account of any proceedings for assessing his GST liability. This is because notwithstanding, the cancellation of tax payer’s GST registration, it would continue to be liable for all the statutory compliances prior to the date of the cancellation and is not absolved from its liability to pay the statutory dues as may be assessed.

13. As is apparent from the above, the petitioner is not aggrieved by the cancellation of his GST registration. He is essentially aggrieved by the cancellation of his GST registration with retrospective effect. It is material to note that the impugned SCN did not propose for the cancellation of the petitioner’s GST registration with retrospective effect. The impugned order also does not reflect any such reason.

14. It is also important to note that although the impugned SCN called the petitioner to appear for a personal hearing, but no date and time was communicated for the same.

15. As is apparent from the tenor of the impugned SCN, it is cryptic and does not contain any specific details of the allegations. It merely refers to the statutory provision – Rule 21(e) of the Central Goods and Services Tax Rules, 2017 – without providing any clue as to any transaction alleged to have resulted in wrongful availment of the Input Tax Credit (ITC). The purpose of issuing a show cause notice is to enable the notice to respond to the allegation on the basis of which an adverse action is proposed. It is a fundamental principle of natural justice that a person must not be condemned unheard. He must have an opportunity to meet the allegations as set out against him. The impugned SCN fails to satisfy the requisite standard of such a notice.