2023 (7) TMI 1006 - HC - GST

GST registration cancellation set aside for lack of independent consideration by authority acting on external directions

Kritika Agarwal Versus Union Of India And Ors.

Delhi HC set aside GST registration cancellation order passed solely on directions from another authority without independent consideration of ... Cancellation of registration of petitioner - Order passed solely on the directions of another authority without considering the petitioner's reply - HELD THAT:- Undisputedly, in terms of Section 107(4) of the CGST Act, the Appellate Authority had the discretion to condone the delay in filing the appeal, not exceeding one month. In the present case, it is apparent that the petitioner was interacting with the Department for resolution of the matter regarding cancellation of the GST Registration and, the petitioner had sufficiently explained the delay of fourteen days. Considering the wide ramifications of cancellation of GST Registration, the Appellate Authority ought to have condoned the delay. The order dated 28.10.2022 cancelling the GST registration had been passed solely on the directions issued by another authority. The only reason for cancellation of the GST Registration as disclosed in the Order-in-Original is that, the DC(AE), CGST, North Delhi had, by a letter dated 30.09.2022, directed cancellation of the registration of the taxpayer from the date of her GST Registration. It is material to note that the Order-in-Original dated 28.10.2022 also contained a tabular statement, which indicated that no tax was found payable. It is trite law that an authority that is vested with the power to take a decision is required to independently exercise the power and cannot do so on mere directions of another authority, without independently satisfying itself of the said decision - In the present case, it is apparent that the impugned Order-in-Original dated 28.10.2022 has been passed solely on the directions of another authority, without considering the petitioner’s reply to the Show Cause Notice dated 06.10.2022. Plainly, the impugned Order-in-Original dated 28.10.2022 cannot be sustained. The cancellation of the GST Registration of a taxpayer has wide implications for the taxpayer and has the propensity of bringing the taxpayer’s business to a standstill. It could never be the intention of the legislature to exclude persons from carrying on legitimate business. Thus, the measure of cancellation of GST must be exercised with circumspection and only in cases, where it is necessary. The impugned order set aside - petition disposed off. Issues involved:The cancellation of GST Registration and the subsequent appeal process.Details of the Judgment:1. The petitioner challenged the cancellation of her GST Registration and sought a refund of Rs. 20,00,000 deposited under pressure by the respondent authorities. However, the petitioner later decided not to seek relief regarding the deposit at that stage but reserved the right for future remedies.2. The petition focused on challenging the Order-in-Original dated 28.10.2022 canceling the petitioner's GST Registration and the Order-in-Appeal dated 30.05.2023 rejecting the petitioner's appeal against the cancellation.3. The petitioner, engaged in the import and distribution of chemicals and minerals, claimed to have operated under a sole proprietorship concern since before the GST Regime rollout and was registered under the Delhi Value Added Tax Act, 2004.4. The Anti Evasion Staff of Central Tax CGST visited the petitioner's premises on 07.09.2022, seized documents without a panchnama, and pressured the petitioner's father-in-law to deposit Rs. 10,00,000, leading to the cancellation of GST Registration.5. The Show Cause Notice dated 06.10.2022 alleged non-compliance with a summons under the CGST Act, which the petitioner contested, but her registration was still canceled on 28.10.2022 based on directions from another authority without considering her response adequately.6. The petitioner's appeal against the cancellation was rejected on grounds of limitation for filing the appeal after the prescribed period, even though the delay was explained and the Appellate Authority had the discretion to condone it for up to one month.7. The judgment highlighted that the cancellation of GST Registration should be a measure exercised cautiously, as it can severely impact a taxpayer's business operations, and decisions should be made independently without solely relying on directions from other authorities.8. Ultimately, the Court set aside the Show Cause Notice, Order-in-Original, and Order-in-Appeal, emphasizing that any adverse actions against the petitioner should be accompanied by a proper Show Cause Notice with reasons to ensure fair proceedings.9. The petition was disposed of accordingly, with all pending applications also being resolved.