The Hon’ble High Court of Delhi vide its order dated 29.11.2022 in the matter of M/s KPM Enterprises Vs. The Commissioner, Delhi Goods and Service Tax & Ors. in W.P. (C) – 16388/2022 & CM No. 51463/2022, held that cancellation of registration for the reason that’ the taxpayer fount not-functioning/not existing at the principal place of business’ not sustainable, when no intimation under Rule 25 was given to the assessee prior to inspection and no photographs were taken at the time of inspection and uploaded on the common portal.

The Petitioner filed the writ petition before the Hon’ble High Court challenging an order dated 02.11.2022 passed by the respondent, whereby the petitioner’s GST registration was cancelled by the respondents with effect from 09.09.2022.  The petitioner has also challenged show cause notice dated 27.09.2022 suspending the registration of the petitioner from the date of the Show cause notice itself.

Facts of the case: –

• That the petitioner was registered under the GST Act on 09.09.2022 and a registration Certificate (Certificate No.07DGMPM1441Q2ZT) was issued. The petitioner is engaged in the business of betel nuts and placed an order a supplier (M/s G.G. Agencies) located in the State of Karnataka, who supplied 350 bags of areca nut weighing 24,500 Kgs at a total consideration of Rs. 72,03,000/- which included taxable Rs. 68,60,000/- and IGST amount of ₹3,43,000/- (5% of the taxable value).
• That the said goods were seized by the Assistant Commissioner -II, Circle-F Jaipur at Bhagru, Ajmer road, Jaipur, finding it suspicious, though, without stating proper reasons for the same. The petitioner has challenged the said action which is pending before the High Court of Rajasthan in Jaipur.
• That in furtherance of the said action, the concerned Officer from Jaipur had visited Delhi and with the aid of the respondents, conducted an alleged inspection on the premises of the petitioner on 27.09.2022.
• That the said inspection led to issuance of show cause impugned in the present case and suspension of petitioner’s registration. In terms of the impugned show-cause notice, the petitioner was called upon to show-cause as to why its GST registration should not be cancelled, for the reason that ‘taxpayer found non-functioning/not existing at the principal place of business.’
• It is thereafter, the impugned order cancelling the registration of the petitioner was passed, although no demand was raised.

That referring to Rule 25, it was submitted on the behalf the petitioner that the alleged inspection is in violation of Rule 25 of the CGST Rules, 2017 as the petitioner was not granted the opportunity to be present at the site and no photographs as required were uploaded.

On the other hand, it was admitted on the behalf of the respondents that the impugned order ought to have given an opportunity of hearing before the impugned order cancelling the registration was made and the same may be set aside. Further, even though Rule 25 of the CGST rules was not followed, the petitioner can be given an opportunity to contest the show cause notice.  All the contentions including the Rule 25 would be available to the petitioner.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case found that according to the respondents, there was no establishment at the said address and the petitioner was not functional. The field visit report (GST RG-30) was prepared. However, it was conceded that no intimation was served on the petitioner prior to the inspection, and also not photographs were taken & uploaded.
• Considering the contention raised on the behalf of the respondents, it was found by the Hon’ble Court that it is not acceptable that the impugned show cause notice can be sustained, as it was issued on the basis of the alleged inspection which is contrary to the CGST rules. Further, it was also informed on the behalf of the respondents that no photographs were taken at the time of inspection as required.

The Hon’ble Court with the above findings, allowed the writ petition by setting aside the impugned order and show cause notice.  The respondent would be at liberty to make further inquiries as it considers fit in accordance with law, and in the event the respondent is of the view that the petitioner is not carrying on any business and is not functional, it would be at liberty to issue a fresh show-cause notice fairly setting out the reasons for the same and to proceed in accordance with law.  It is clarified that nothing stated in this order shall be construed as an expression of the opinion as to whether the petitioner was carrying on the business as on that date.

 

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