The Hon’ble High Court of Delhi vide its order dated 26^th April, 2022 in the matter of Micro Focus Software Solutions India Private Limited Vs. Union of India & Anr. in W.P.(C) 8451/2021, CM Nos.26176/2021 & 28634/2021, held that the order cancelling the registration without considering the reply to show cause notice filed by the petitioner and passed on the basis of physical inspection carried without prior notice to the Petitioner as per Rule 25 of the CGST rules is not sustainable and liable to be set aside.

The Petitioner preferred the writ petition challenging the order dated 09.12.2020 cancelling the registration of the petitioner and order dated 18.02.2021 pertaining to the dismissal of the application for revocation of cancellation.

Facts: –

• The petitioner was issued with a show cause notice dated 11.11.2020 calling upon to show cause as to the factum of it not being found functioning or existing at the given address.
• The petitioner was given seven working days to file the reply for the same and to appear (through Authorized Representative) for personal hearing on 16.11.2020 at 11 A.M. However, the petitioner sought extension vide its letter dated 12.11.2020 and requested for a personal hearing on 23.11.2020.
• The petitioner on 23.11.2020 duly filed a reply to the show cause notice stating that ‘the company was operating from its registered address till November 2019 and thereafter discontinued its business operations in Delhi. Further the cancellation of registration was not applied due to Issuance of credit notes during FY 2020-21 against supplies made upto December 2019, Amendment of incorrect particulars inadvertently reported in GST returns filed during FY 2019-20, Furnishing of Form GSTR-9 and GSTR-9C for FY 2017-18/2018-19 on account of extended due dates & filing of refund claims.  It was submitted that the company will suo-moto apply for cancellation of registration once GSTR-9 and GSTR – 9C is filed, and the refund claim for excess payment of tax made during FY 2018-19 is filed.’
• Subsequently, the petitioner was issued with the impugned order dated 09.12.2020, cancelling its registration, and later an application being preferred for revocation on 22.12.2020, the same was also dismissed vide order dated 18.12.2021 by the respondents.

Petitioner’s Submissions: –

• It was submitted on the behalf of the Petitioner that there has been complete violation of principles of natural justice on the part of respondents. The petitioner was not issued any prior notice before carrying out physical inspection and the same is in violation of Rule 25 of the CGST Rules.  Moreover, the report of physical inspection was given to the petitioner only during the course of the present proceedings.
• That the respondents while passing the impugned order dated 09.12.2020 did not consider the communication dated 12.11.2020, filed for extension of time and petitioners reply dated 23.11.2020.

 

Respondents’ Submissions: –

• It was submitted on behalf of the respondents that there is a discrepancy/contradiction as to when the petitioner closed down its business at the given address.
• That the petitioner was given the opportunity of filing the reply to the show cause notice and when the same was not filed, the impugned order dated 09.12.2020 was passed. Similarly, a personal hearing was given qua the revocation application, and thereafter the order was passed.
• It was submitted that the order rejecting the revocation application has been passed, and the petitioner for the said reason should be relegated to an alternative statutory remedy.
• That on behalf of the respondents, a show cause notice 09.03.2022 was placed before the Hon’ble Court, which stated reasons as to why the petitioner’s refund application is liable to be rejected. 

Held: –

• The Hon’ble Court after considering the submissions from the both sides, was of the view that the impugned orders dated 09.12.2020 & 18.02.2021 need to be set aside observing the following: – (i) It is clear that the petitioner had sought extension of time to respond to the show cause notice dated 11.11.2020., (ii) In any event, the petitioner was given time to respond to the same in “seven working days”. The calculation made by the petitioner demonstrates 23.11.2020 was in fact the 7th working day, (iii) The petitioner, admittedly, filed a reply on 23.11.2020, in which reasons were set out as to why the petitioner wished to continue with its registration, (iv) There is no reference to the SCN reply filed by the Petitioner in the order dated 09.12.2020, (v) It is clear from the revocation application rejection order 18.02.2021 that the inspection was carried out on the premises of the petitioner, however no notice, as required under Rule 25 was issued to the Petitioner for such inspection.
• The Hon’ble court also took a note that report of physical inspection was not submitted even after the passing of impugned order date 09.12.2020, and was only furnished during the pendency of the present proceedings.
• Further the perusal of impugned order 09.12.2020 that there is no outstanding tax to be paid by the Petitioner. Moreover, the petitioner wishes to maintain its registration only for the reasons stated in reply dated 23.11.2020.
• As far as the document dated 09.03.2022, its nothing but a proposal for a rejection of refund claim of the petitioner, it discloses that it is founded on the fact that the petitioner’s registration has been cancelled and that too with retrospective effect i.e., w.e.f. 01.07.2019.
• The Hon’ble High Court with the above findings, and as already stated above, set aside the impugned orders dated 09.12.2020 & 18.02.2021 directing the respondents to revive the registration of the petitioner. Further once the Petitioner’s purpose of registration is over, it would suo moto apply for de-registration.