The Hon’ble High Court of Andhra Pradesh High Court vide its order dated 16.11.2022 in the matter of M/s S.A. Traders Vs. The Goods and Service Tax Officer, The Chief Commissioner of State Tax, State of Andhra Pradesh in W.P. No. 36673 of 2022, set aside the show cause notice and the order cancelling the registration of the assessee on the ground that both, the show cause notice and the order are doubtful enough and have been issued without mentioning the mistake, misdeed or fraud committed by the Assessee.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the cancellation of registration under the GST Act, 2017 being illegal, arbitrary and without following the principles of natural justice and also sought direction to set aside the impugned proceedings dated 20.10.2022 undertaken by Respondent No. 1.

Facts of the Case: –

• That a show cause notice dated 01.10.2022 was issued to the petitioner proposing to cancel the registration of the petitioner mentioning ‘in case the registration has been obtained by means of fraud, wilful misstatement or suppression of facts.’
• That on the basis of the said show cause notice, and order of cancellation of registration dated 20.10.2022 was issued mentioning ‘On verification of GSTR 1 vs GSTR 3B returns and sales turnover, it is observed that, within a span of five months, the TRP has made purchase and sale of scrap worth of Rs.9.63 Crores for which he has not submitted clear records. Hence the transactions appear to be suspicious and hence registration is hereby cancelled.’

Petitioner’s Submissions: –

• On the behalf of the petitioner, it was submitted that the show cause notice and the impugned order dated 20.10.2022 cancelling the registration, could not able to show any violation on the part of the petitioner.
• It was submitted that the show cause notice as well as the impugned order cancelling the registration do not mention of any mistake or fraud or misdeed committed by the petitioner in the due course of its business. Thus, both show cause notice and the impugned order are not sustainable in the eye of law.
• Reliance was placed on the decision of Hon’ble High Court of Telangana in W.P. Nos. 39498 and 39502, wherein dealing with the similar circumstances, the Hon’ble High Court set aside the cancellation of GST registration. Besides, it was directed to the Principal Commissioner of Central Tax, Hyderabad Commissionerate, to look into the conduct and functioning of the 1st respondent therein and to take remedial steps.

Held: –

• The Hon’ble High Court after considering the submissions, facts of the case and on perusal of the show cause notice and the order of cancellation, found force in the submission of learned counsel for the petitioner, for, both show cause notice as well as the order of cancellation of registration are doubtful enough and failing to mention the misdeed or fraud allegedly committed by the petitioner.
• It was found that while the show cause notice says that ‘in case’ the petitioner has committed any fraud, wilful misstatement or suppression of facts, the order of cancellation of registration says that he has not submitted ‘clear records.’ Both of them are not clear enough to understand the mind of the issuing authority.
• With the aforesaid discussions and considering the decision of Hon’ble Telangana High Court relied upon by the petitioner, it was held by the Hon’ble Court that there is no hesitation in holding that both impugned show cause notice as well as the order for cancellation of registration are not sustainable in the eye of law.

The Hon’ble High Court with the above findings, allowed the writ petition by setting aside impugned order of cancellation of registration dated 20.10.2022 and show cause notice dated 01.10.2022. Liberty was granted to the respondent authority to issue fresh show cause notice in accordance with the governing law and rules to the petitioner indicating therein the clear reasons for the violations if any and give sufficient time to the petitioner herein to submit objections/reasons and consider the same and pass an appropriate order.