Judicial Review Overturns GST Registration Cancellation, Reinstates Firm's Right to Fair Hearing Under Section 29(2)

The HC allowed the writ petition challenging registration cancellation. The court found the cancellation invalid under GST Act Section 29(2), noting the authorities improperly rejected the revocation application without valid grounds. The decision set aside the cancellation orders while permitting the department to continue proceedings under Section 74, ensuring procedural fairness for the registered proprietorship firm.

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Issues involved:
Challenge to order rejecting revocation of registration cancellation and dismissal of appeal against cancellation of registration.

Details of the judgment:

Challenge to order rejecting revocation of registration cancellation:
The petitioner, a registered Proprietorship firm, changed its business address and moved an amendment application which was approved. A survey conducted at the old business address revealed no business activity, leading to a show cause notice for cancellation of registration. The registration was cancelled based on allegations of availing fake ITC credit. The petitioner sought revocation of cancellation, but the application was rejected without a prior show cause notice. The Court held that cancellation can only occur under specific conditions outlined in Section 29(2) of the GST Act, none of which included the alleged ITC credit issue. The Court cited previous judgments to support its decision and set aside the order rejecting revocation.

Dismissal of appeal against cancellation of registration:
The Court found errors in the decision-making process by the authorities, noting that the ground for cancellation was not valid under Section 29(2). The Court emphasized that being a bogus firm is not a valid ground for cancellation. Additionally, the respondents had initiated proceedings under Section 74 for recovery of allegedly wrongly taken ITC credit, creating a contradiction in their stance. The Court concluded that the rejection of the revocation application and the dismissal of the appeal were improper exercises of power by the department. Therefore, the impugned orders were set aside, allowing the respondent to continue proceedings under Section 74 as per the counter affidavit.

Conclusion:
The writ petition was allowed, and the orders dated 17.05.2021 and 14.09.2021 were set aside. The Court clarified that the respondent could proceed with any ongoing proceedings under Section 74 in line with the counter affidavit.

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