Legally flawed proceedings cancelling the registration of the assessee not sustainable 

Facts: The Petitioner filed the writ petition before the Hon’ble High Court praying for quashing and setting aside the order dated 22.02.2022 passed by the Joint Commissioner, CGST (Appeals – I), Delhi.  It was also prayed to quash and set aside the order dated 06.08.2021, cancelling the registration of the Petitioner as well as the order dated 08.12.2021, rejecting the revocation application of the petitioner. Prayer was also made to restore the registration of the petitioner with immediate effect.

Held: –

• The Hon’ble Court after considering the submissions made and facts of the case, found that a Show Cause Notice dated 08.07.2021 was issued to the petitioner without stating any reason for cancellation of registration of the petitioner. It is quite evident that the principles of natural justice were not followed by the respondent/revenue, as nothing was proposed by way of an action that was intended to be taken against the petitioner-consortium.
• Further, the perusal of the order dated 06.08.2021, cancelling the registration of the petitioner, makes the matter worse, as no reason has been stated in the order by the respondent/revenue for cancelling the registration of the petitioner.
• That the petitioner filed an application for revocation of cancellation of registration on 21.10.2021 and in pursuance of same, a show cause notice dated 17.11.2021 was issued to the petitioner, which is not as per the procedure prescribed under the CGST Act, 2017.
• It was found that the said SCN dated 17.11.2021 was issued to the petitioner after the filing of revocation application, stating that “Reason for revocation of cancellation Others (Please specify)- During PV conducted on 05.07.2021, the unit was found non-existent at registered premises. In the current request for revocation of cancellation he has not submitted any proof/explanation in this regard”., and the petitioner duly filed the reply dated 23.11.2021 to said SCN dated 17.11.2021, submitting the reason as to why the petitioner’s unit was not found in existence at the registered premises.
• It was found by the Hon’ble Court that there are two aspects to be noticed at this stage. Firstly, nothing of this kind, as stated in SCN 17.11.2021, was there in SCN dated 08.07.2021. Secondly, in the reply dated 23.11.2021, it was submitted by the petitioner that it has shifted its place of business to another location and in support documents were also submitted.
• That despite the said submissions by the petitioner, the registration of the petitioner was cancelled by order dated 08.12.2021, without dealing with the submission with respect to change of location of the place of business. It was stated in the order that “the Principal place of business is non-existent therefore revocation of cancellation may not be granted. As informed during the personal hearing, the principal place of Business has been taken over by the bank and company is under liquidation proceeding.”
• Later, the appeal against the said order was preferred by the petitioner, which was also dismissed by the Joint Commissioner, CGST – I, Delhi vide impugned order dated 22.02.2022, on the ground that ‘that the petitioner has not been able to suffice the cause for revoking the order directing the cancellation of registration’.
• The Hon’ble Court considering the fact that ‘the lead member of the petitioner’s consortium has been order to be Liquidated by the concerned NCLT and the counsel appearing on the behalf of the petitioner has been authorized by the Official Liquidator to argue the matter’, found that from the perusal of the facts, it is not in dispute that the first show cause notice dated 08.07.2021 was issued without stating any reasons. Further from the second show cause notice dated 17.11.2021, it came to the knowledge of the petitioner consortium that the registration has cancelled by the revenue on the ground of inspection carried on 05.07.2021, however this fact about the inspection was not there in the SCN dated 08.07.2021.  The petitioner duly filed reply to the SCN dated 17.11.2021 and it was submitted that PIL had relocated itself, however, there is no discussion about the same while passing the impugned order dated 22.02.2022.
• The Hon’ble Court with the above discussions, held that the impugned order is not sustainable as in the first SCN dated 08.07.2021, no reason was stated for cancellation of registration. Secondly, the fact that any inspection was carried out was not there in the first SCN, moreover, no notice for physical inspection exercising powers under Rule 25 was issued to the petitioner by the revenue, which is required to given in view of Micro Focus Software Solutions India Pvt Ltd. vs. Union of India & Anr – in W.P (C) 8451/2021 & Curil Tradex Pvt. Ltd. vs The Commissioner, Delhi Goods and Service Tax & Anr. Thirdly, another show cause notice dated 17.11.2021 is not as per the procedure prescribed under the CGST Act.  Fourthly, the impugned order is bereft of any reasons and does not even deal with the information provided by the petitioner about its relocation. Thus, the entire proceedings, right up to the stage of passing of the order-in-appeal was legally flawed.

The Hon’ble Court with the above findings set aside the impugned order with a liberty to the revenue/respondent to issue a fresh SCN, if required, and ordered for restoring the registration of the petitioner in the meanwhile.  The petitioner would file the returns in four weeks and the designated portal concerning the petitioner-consortium will have to be activated within forty-eight hours of the receipt of the order.  Further, no interest and penalty will be levied on account of delay in filing returns.

To read the complete judgment 2022 Taxo.online 963