The Hon’ble High Court of Kerala vide its order dated 22.12.2022 in the matter of M/s Pankaj Cottage Vs. The Goods and Service Tax Officer, Central Tax and Central Excise & Others in WP (C) No. 28783 of 2022, set aside the order cancelling the registration of the Assessee, observing that the order has been passed on the basis of proceedings initiated by the issuance of show cause notice issued in the wrong form and not in accordance with the rules prescribed in this regard.  Therefore, the action taken by the Officer is clearly without jurisdiction.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the order cancelling its registration passed under CGST/SGST Acts, in the exercise of powers under Section 29 of the said enactments.

Facts of the Case: –

• That a show cause notice, which never came to the attention of the petitioner, was issued to the petitioner electronically.
• Thereafter, when the order of cancellation of registration, based on the said show cause notice, came to the knowledge, the petitioner filed an application for revocation. However, the revocation application was rejected on the ground of same being filed beyond the time prescribed under Section 30 of the CGST/SGST Act.
• Being aggrieved, the petitioner filed an appeal under Section 107 of the CGST/SGST Acts, which is pending for consideration before the Appellate Authority.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the entire procedure adopted by the respondents in cancelling the registration of the petitioner is absolutely illegal and unsustainable.
• It was pointed out that the show cause notice issued prior to cancellation of registration is not in the manner prescribed by the Rules, and the same should have been issued in Form GST REG-17 instead of Form GST REG-31.
• That Form GST REG-31, in which the show cause notice has been issued, is the form applicable to proceedings leading to the suspension of the registration for reasons specified.
• It was submitted that none of the particulars of Form GST REG-17 are specified in the show cause notice issued in Form GST REG – 31 to the petitioner in the present case, even that form has not been used in its entirety.
• That the notice has been issued by the Officer in a form containing vague details of the reasons of cancellation of registration, which is not permissible in law.
• Relying on the decision of the Division Bench of Gujarat High Court in Aggarwal Dyeing and Printing v. State of Gujarat (Judgment dated 24.2.2022 in Special Civil Application No. 18860/2021 and connected cases) & Sing Traders v. State of Gujarat (Judgment dated 6.4.2022 in Special Civil Application No. 6315/2022), it was contended that where the show cause notice is vague and where the order of cancellation also does not specify the factors which lead to the cancellation of registration, the entire proceedings must be held bad in law.
• Lastly, it was submitted that the delay in filing returns and payment of tax for the period of default was not wilful and was on account of severe financial stress.

Respondents’ Submissions: –

• Replying to the contentions raised by the petitioner, on the behalf of the respondents, reference was made to Section 29, Section 30 of the CGST/SGST Acts as wells to Rule 22(1) & Rule 21A of the CGST/SGST Rules, and forms namely Form GST REG-17 and Form GST REG-31, to contend that that the scheme of cancellation of registration is inbuilt into the provisions of Sections 29 and 30.
• It was submitted that the CGST/SGST Acts being fiscal legislations, the provisions must be interpreted strictly in favour of the revenue.
• It was submitted that the provisions in Section 29 are incorporated for the purposes of ensuring strict compliance with tax laws and the failure of the petitioner to file returns led to the cancellation
• That the judgment of Madras High Court in Suguna Cutpiece Center v. Appellate Deputy Commissioner ( ST) GST), Salem; (2022) 99 GSTR 386 (Mad) and those of the Gujarat High Court in Aggarwal Dyeing and Printing (supra) & Sing Traders actually travel outside the scheme of provisions contained in that Act and therefore should not be followed by this court.
• Further the notices issued are ones generated by the system and convey with sufficient clarity the reason for taking steps for cancellation.
• To support its stand, reliance was placed on the decision of the Karnataka High Court in M/s. M.S. Retail Private Limited v. Union of India [Judgment dated 7-10-2020 in W.P No. 9041 of 2020] as also the judgment of the Madhya Pradesh High Court in Rajdhanai Security Force Pvt. Ltd. v. Union of India [Judgment dated 25.4.2022 in W.P No. 11498 of 2021], and it was contended that this court should not interfere with the order cancelling the registration as there is no error of jurisdiction.

Held: –

• The Hon’ble Court after considering the submissions made from the both sides and facts of the case, was of the view that the petitioner is entitled to succeed in the present writ petition.
• It was found by the Hon’ble Court that the show cause notice issued to the petitioner has been issued in Form GST REG-31, which is a form is to be issued in relation to proceedings for suspension of registration and is issued with reference to Rule 21A of the CGST/SGST Rules.
• It was found that it is clear that Form GST REG-31 is one relatable to proceedings for suspension of registration and cannot be treated as a show cause notice under Rule 21 of the CGST Rules, which requires the issuance of a notice in form GST REG-17.
• Further it was noticed by the Hon’ble Court that the Officer issued the notice in form GST REG-31 by omitting specific details from the form and by treating it as a notice for cancellation.
• In the above Circumstances, taking reference of Babu Verghese v. Bar Council of Kerala, (1999) 3 SCC 422, wherein it was held that ‘It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all’ the Hon’ble Court observed that It is a principle at the heart of administrative law that where the law requires a thing to be done in a particular manner, it must be done in that manner alone.
• Therefore, it was held by the Hon’ble Court that the action taken by the officer by initiating proceedings in form GST REG-31 of the CGST Rules and completing the proceedings for cancellation of registration by issuing order is clearly without jurisdiction. If the Officer wishes to initiate proceedings for cancellation of registration, he must issue a notice as specified in Rule 21 of the CGST Rules and in form GST REG-17 and not in form GST REG-31.
• Thereafter, the Hon’ble Court referring to the decision of the Gujarat High Court in Aggarwal Dyeing and Printing (Supra), wherein the Court considered ‘the contents of the show cause notice issued in that case and came to the conclusion that the show cause notice was woefully inadequate inasmuch as it did not specify the reasons which compelled the Officer to initiate action for cancellation of registration’, found that the show cause notice apart from the fact issued in the wrong form, is also bad for the complete absence of any detail.
• The show cause notice issued is clearly vague and therefore the law laid down in the judgments of the Gujarat High Court in Aggarwal Dyeing and Printing (supra) and Singh Traders (supra) clearly apply to the case in hand. The judgments of the Karnataka High Court and the Madhya Pradesh High Court relied upon on the behalf of respondents are not applicable to the facts of the case.
• Further, the contention raised on the behalf of the respondents that ‘the law must be strictly interpreted in favour of the revenue’ is not a principle that applies to the situation that this Court is concerned. That in the instant matter, this Court is concerned with the provisions of Sections 29/30 of CGST/SGST which gives power to cancel registration and also to revoke it. These are not provisions which need to be interpreted with reference to the principles laid down in the Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and others; (2018) 9 SCC 1 & Government of Government of Kerala and another v. Mother Superior Adoration Convent; (2021) 5 SCC 602.

The Hon’ble Court with the above findings, allowed the writ petition by quashing the impugned order.  Further, the quashing of the impugned order of cancellation will not have the effect of absolving the petitioner of any fiscal liability. The petitioner will be required to file all defaulted returns together with tax, late fee, interest, penalty etc., within a period of two weeks from the date on which the registration of the petitioner is restored in compliance with this judgment.

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