2023 (11) TMI 876 - HC - GST

Fraudulent ITC claim leads to registration cancellation upheld under Section 29(2) retrospective provisions

The Calcutta HC dismissed a petition challenging the rejection of an application for revocation of registration cancellation. The petitioner had obtained ... Rejection of petitioner’s application for revocation of cancellation of registration - obtaining ITC fraudulently which is ultimately passed on to other third entities - violation of principles of natural justice - HELD THAT:- On a plain reading of section 29 of the Act, it is evident that there is a apparent difference between section 29 (1) and section 29 (2) of the Act. Both the sections operate in different fields. The power to cancel retrospectively is provided under section 29 (2) of the Act. The intention of the Legislature is that in certain circumstances, the authorities have the power to retrospectively cancel the registration of any person which has been obtained by fraud, willful misstatement or suppression of facts. Entries which have been obtained on the basis of fraudulent registration and to allow accumulation of tax credit in favour of third parties would defeat the object and purpose of the Act - the Legislature had contemplated retrospective cancellation of registrations which have been obtained to fraudulently avail ITC not only by the taxpayer whose registration is sought to be cancelled but also other entities which wrongfully seek to avail ITC. There has been no violation of the principles of natural justice in the proceedings conducted by the authorities. On the contrary, the petitioner had been granted adequate opportunity by the respondent authorities. The impugned orders are well reasoned - No cogent evidence has been relied on by the petitioner to warrant any interference with the impugned orders. There has also been no contravention of any law nor any procedural impropriety which warrants any interference. Petition dismissed. Issues:The judgment involves the cancellation of registration under section 30(1) of the West Bengal Goods and Services Tax Act, 2017 (WBGST) and the corresponding sections of the Central Goods and Services Tax Act, 2017 (CGST). The issues include fraudulent registration, willful misstatement, suppression of facts, issuance of fake invoices for Input Tax Credit (ITC), and the subsequent rejection of the application for revocation of cancellation of registration.Judgment Details:1. The petitioner challenged an order affirming the cancellation of registration under WBGST and CGST Acts. The registration was cancelled due to non-functioning at the principal place of business, leading to the issuance of fake invoices for ITC. The petitioner's application for revocation of cancellation was rejected by the Appellate Authority.2. The previous litigation involved a show cause notice for cancellation of registration, which was later cancelled with retrospective effect. After subsequent legal proceedings, the registration was cancelled based on fraud and willful misstatement. The petitioner's application for revocation was also turned down.3. The petitioner argued that the cancellation was based on irrelevant factors and unilateral field visit reports. They contended that the cancellation should not have retrospective effect and cited a relevant legal precedent to support their case.4. The respondent authorities defended the cancellation, stating that the petitioner was not involved in genuine business transactions, as evidenced by physical inspections and lack of consistent turnover. They argued that the cancellation was justified based on the evidence gathered.5. The judgment highlighted the provisions of sections 29 and 32 of the Act, emphasizing the power to cancel registration retrospectively in cases of fraud or willful misstatement. The legislative intent was to prevent fraudulent accumulation of tax credit through fake transactions.6. The court found no violation of natural justice in the proceedings, noting that the authorities provided ample opportunity to the petitioner. The cancellation was upheld based on the detailed enquiry and discrepancies in the petitioner's business operations.7. Ultimately, the petition challenging the cancellation of registration was dismissed, with no costs imposed.This summary provides a detailed overview of the issues, arguments presented by both parties, relevant legal provisions, and the court's decision in the judgment delivered by the High Court of Calcutta.