2025 (6) TMI 258 - HC - GST

Petitions dismissed after discovering extensive forgery in GST registration cancellation cases, investigation ordered

M/s. S.R. Enterprises Versus, M/s. Trix India Sales Corporation, and M/s. Compact Enterprises M/s. Royal Enterprises Versus Principal Commissioner Of Goods And Service Tax East Delhi.

M/s. S.R. Enterprises Versus, M/s. Trix India Sales Corporation, and M/s. Compact Enterprises M/s. Royal Enterprises Versus Principal Commissioner Of ... 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court include:(i) Whether the cancellation of GST registration by the authorities with retrospective effect is valid in the absence of clear reasons stated in the Show Cause Notices (SCNs) and cancellation orders.(ii) Whether the procedural requirements under Section 29(2) of the Central Goods and Services Tax Act, 2017 (CGST Act) have been complied with, particularly regarding issuance of reasoned SCNs and opportunity to the taxpayer to respond before cancellation.(iii) The validity and authenticity of the SCNs and affidavits filed in the writ petitions challenging the GST cancellation orders.(iv) The extent to which forged or fabricated documents and fictitious petitioners affect the maintainability of the writ petitions and the consequent legal consequences.(v) The appropriate remedial measures and directions in cases involving alleged forgery, fabrication, and GST fraud, including investigation and prosecution.2. ISSUE-WISE DETAILED ANALYSISIssue (i) & (ii): Validity of Retrospective Cancellation of GST Registration Without Reasons in SCNs and OrdersRelevant Legal Framework and Precedents:Section 29(2) of the CGST Act empowers the proper officer to cancel GST registration from such date, including retrospective date, if certain circumstances exist. However, the power to cancel retrospectively is not to be exercised mechanically or routinely but requires objective satisfaction and due application of mind.The Court relied on precedents including the decision in Riddhi Siddhi Enterprises vs. Commissioner of CGST and Ramesh Chander vs. Assistant Commissioner of CGST, which emphasize that both the SCN and the cancellation order must clearly state reasons, especially when cancellation is retrospective. The absence of such reasons vitiates the order.Court's Interpretation and Reasoning:The Court noted that the SCNs in the present petitions did not disclose any intent or reasons for retrospective cancellation, nor did the cancellation orders provide cogent reasons. The Court held that retrospective cancellation without prior notice or reasons violates principles of natural justice and statutory mandate.Key Evidence and Findings:The Court extracted portions of earlier orders where the lack of reasons in SCNs and cancellation orders was highlighted. The Court observed contradictions in orders stating no reply was received despite acknowledging receipt of replies, and the absence of any mention of retrospective cancellation in SCNs.Application of Law to Facts:The Court applied the legal principles requiring reasoned SCNs and orders and found the impugned cancellations unsustainable. It modified the cancellation orders to be effective from the date of issuance of the SCNs rather than retrospectively.Treatment of Competing Arguments:The Court acknowledged the respondent's contention regarding the consequences of retrospective cancellation (e.g., denial of input tax credit to customers) but held that such consequences require deliberate consideration and cannot justify mechanical retrospective cancellation.Conclusions:The Court concluded that absence of reasons in SCNs and failure to put petitioners on notice of retrospective cancellation invalidated the cancellation orders. The writ petitions succeeded on this ground.Issue (iii) & (iv): Authenticity of SCNs, Affidavits, and Petitioners; Effect of Forgery and Fabrication on ProceedingsRelevant Legal Framework:Procedural safeguards require that affidavits and documents filed in Court be genuine and verified. Forgery and fabrication constitute criminal offenses under the Indian Penal Code and related statutes.Court's Interpretation and Reasoning:During proceedings, the Court was informed by the Department that the SCNs filed with the writ petitions were fabricated. Investigation revealed that the petitioners were fictitious persons, affidavits were attested without physical presence, and Aadhaar cards submitted were forged or had mismatched photographs.Key Evidence and Findings:Investigations by police and the Directorate General of GST Intelligence (DGGI) confirmed that the individuals named as petitioners were either untraceable or had no connection with the firms. The Aadhaar cards were verified by UIDAI and found to be forged or misused. Statements of family members of one individual indicated he was a domestic help, not a proprietor of a business with large financial transactions. The Oath Commissioner could not confirm the physical presence of deponents during affidavit attestation.Application of Law to Facts:The Court found that the writ petitions were filed on the basis of forged documents and fictitious identities, amounting to a well-planned conspiracy to commit GST fraud and misuse judicial process.Treatment of Competing Arguments:Senior Counsel for the petitioner's counsel stated ignorance of the origin of the forged documents and identities. The Court noted this but emphasized the seriousness of the offenses and the need for investigation.Conclusions:The Court held that the petitions were not maintainable due to forgery and fabrication. It directed registration of FIRs and investigation by DGGI and Delhi Police, and recalled earlier orders passed on the basis of forged documents.Issue (v): Appropriate Remedial Measures and DirectionsCourt's Reasoning and Directions:Given the gravity of the forgery and fraudulent use of judicial process, the Court directed the DGGI to conduct an in-depth investigation and file complaints with the Crime Branch for registration of FIRs. The Court also ordered that the Registrar General lodge complaints under relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 and Bharatiya Nyaya Sanhita, 2023 for offenses including forgery, fabrication, cheating, and criminal conspiracy.The Court further directed verification of Aadhaar cards by UIDAI and recommended procedural reforms such as mandatory photographing of deponents at the time of affidavit attestation by Oath Commissioners and Notaries to prevent such misuse in future.The Court recalled all previous orders disposing of the writ petitions on merits and dismissed the petitions on grounds of forgery and fabrication.3. SIGNIFICANT HOLDINGS'The mere existence or conferral of that power [to cancel GST registration retrospectively] would not justify a revocation of registration. The order under Section 29(2) must itself reflect the reasons which may have weighed upon the respondents to cancel registration with retrospective effect. Given the deleterious consequences which would ensue and accompany a retroactive cancellation makes it all the more vital that the order be reasoned and demonstrative of due application of mind.''The power to cancel retrospectively can neither be robotic nor routinely applied unless circumstances so warrant.''Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In fact, in our view, order dated [cancellation order date] does not qualify as an order of cancellation of registration.''The four petitions were filed by persons who did not have any authority on behalf of these firms as of now. The four petitions were signed by deponents who were fictitious persons. The Aadhaar Cards which were relied upon by ld. Counsel for the Petitioners are clearly forged and fabricated.''The SCNs which were filed with the writ petitions were also forged and fabricated.''The persons who are controlling these firms and these individuals are clearly not known to the Court as of date. The same appears to be a well-planned conspiracy to commit GST fraud and to obtain monetary benefits and would require an in-depth investigation by the concerned authorities.''In view of the fact that the affidavits as also the documents including the SCNs in the present matter are forged and the persons i.e. Petitioners are fictitious, it is deemed expedient in the interest of justice that an inquiry ought to be conducted for the offences of forgery, fabrication, etc.'Final Determinations:The Court allowed the writ petitions on the ground of absence of reasons in SCNs for retrospective cancellation but subsequently recalled those orders upon discovery of forgery and fabrication. The petitions were dismissed, and directions were issued for criminal investigation and prosecution. The Court emphasized the need for reasoned orders in GST cancellation and vigilance against fraudulent litigation practices.