2023 (10) TMI 412 - HC - GST

TTZ authorities cannot cancel GST registration as taxing statutes require strict interpretation under GST Act provisions

The Allahabad HC allowed the petition challenging GST registration cancellation. The petitioner, a coal trader, faced cancellation allegedly for not ... Cancellation of GST registration of petitioner - cancellation on the ground that the petitioner was not maintaining the sale register - HELD THAT:- Admittedly, it is not in dispute that the TTZ authorities have been constituted by Ministry of Environment and Forest, Government of India in exercise of power conferred by sub-clause 1 & 3 of Section 3 of Environment (Protection) Act, 1986, which is known as the Taj Trapaezium Zone Pollution (Prevention and Control) Authority. In exercise of power under Sections 5 & 24 of the said Act, the direction can be issued in the interest of protecting the environment - On perusal of Section 5 of Environment (Protection) Act, it is clear that for the protection of environment, a direction can be issued to officer or any authority and they shall be bound by the said direction in respect of industry only. In the case in hand, the petitioner is the coal trader and from his business activities does not emanate any hazardous thing which is bad for the environment. From bare perusal of Section 24 of the Environment (Protection) Act, 1986, it is evidently clear that if an offence is punishable under this act and the offender is also found guilty of said offence, offender shall be liable to punish under other act and not under Environment (Protection), 1986 Act. The Hon'ble Apex Court in the case of Ind-Swift Laboratories Limited [2011 (2) TMI 6 - SUPREME COURT] has categorically held that a taxing statute must be interpreted in the light of what is clearly expressed therein meaning thereby when Section 29 read with rule 21 specifically provides a complete mechanism statute under which the registration can be cancelled and no aid can be taken by any other statute - The Division Bench of this Court in the case of Agra Coal Suppliers [2011 (5) TMI 1145 - ALLAHABAD HIGH COURT] has held that in the area of TTZ, the registration cannot be cancelled. Admittedly, no order of cancellation was passed on the date fixed for 29.4.2022, but thereafter on 14.10.2022 for which neither any notice nor any communication was made to the petitioner. Further, in the cancellation of registration order, it has wrongly been mentioned that no reply was submitted by the petitioner, but the next mentions the reply date. In view of the law laid down by the Division Bench of this Court passed in Agra Coal Suppliers impugned order cannot sustain - It is a matter of common knowledge that under the GST Act, A/c book are to be maintained by every person. There is no finding at any stage to show that A/c book were not maintained by the petitioner. In absence of such finding, no violation of section/rule of UPGST Act/UPGST Rule can be made out against the petitioner. Once, there is no violation of Section 29 read with rule 21, any action taken for cancellation of registration cannot sustain in the eye of law. Petition allowed. Issues Involved:1. Validity of the GST registration cancellation under Section 29(2) of the UPGST Act.2. Compliance with procedural requirements and principles of natural justice.3. Authority and jurisdiction of TTZ authorities and their directions under the Environment (Protection) Act, 1986.4. Applicability and interpretation of Section 5 and Section 24 of the Environment (Protection) Act, 1986.5. Interpretation of taxing statutes and the scope of judicial review.Summary:Issue 1: Validity of GST Registration CancellationThe petitioner challenged the cancellation of its GST registration by the Assistant Commissioner, which was upheld by the appellate authority. The petitioner argued that no violation of the GST Act or Rules was committed, and the cancellation was based on directions from the JC (SIB) B, Agra, and TTZ authority, without providing copies of such directions to the petitioner. The Court found that the cancellation order lacked assigned reasons and was procedurally flawed.Issue 2: Compliance with Procedural RequirementsThe Court observed that the cancellation order was passed without proper notice and opportunity for the petitioner to be heard, violating principles of natural justice. The petitioner's reply to the show cause notice was not considered, and the order was passed ex-parte without fixing a date for hearing. The Court cited the Division Bench judgment in Videocon D2h Ltd., emphasizing the necessity of adequate opportunity and proper inquiry.Issue 3: Authority and Jurisdiction of TTZ AuthoritiesThe Court noted that TTZ authorities were constituted under the Environment (Protection) Act, 1986, with powers to issue directions for environmental protection. However, the petitioner, being a coal trader, did not engage in activities harmful to the environment. The Court referenced the Division Bench judgment in Agra Coal Suppliers, which held that TTZ authorities' directions did not extend to canceling coal dealers' registrations.Issue 4: Applicability and Interpretation of Environmental Act ProvisionsThe Court examined Section 5 and Section 24 of the Environment (Protection) Act, 1986, concluding that directions under Section 5 apply to industries causing environmental harm, not to coal traders. Section 24 provides that offenses punishable under the Act should be prosecuted under the relevant statute, not the Environment Act. The Court emphasized that GST authorities should not blindly follow TTZ directions without statutory basis under the GST Act.Issue 5: Interpretation of Taxing StatutesThe Court reiterated the principle that taxing statutes must be interpreted strictly based on their explicit provisions. Citing the Supreme Court judgment in Ind-Swift Laboratories Limited, the Court held that GST registration cancellation must comply with Section 29 read with Rule 21 of the UPGST Act and Rules, without importing provisions from other statutes.Conclusion:The Court quashed the impugned orders dated 14.10.2022 and 01.12.2022, reinstating the petitioner's GST registration with effect from 18.08.2022, and directed the respondent authorities to comply with this reinstatement immediately, providing all consequential benefits. The judgment emphasized adherence to statutory provisions, procedural fairness, and the limited scope of TTZ authorities' directions concerning GST registration.