2025 (12) TMI 432 - HC - GST

Writ dismissed upholding GST registration cancellation, delay condonation refusal, and costs for false statements, no prejudice shown.

HC upheld cancellation of the petitioner's GST registration and refusal to condone delay in filing the statutory appeal. The Court rejected the plea of ... Cancellation of GST registration of petitioner - refusal to condone the delay in filing Appeal - violation of principles of natural justice or non-compliance with the prescribed statutory procedure - HELD THAT:- The argument about breach of natural justice are quite misconceived. The record shows that more than ample opportunities were granted to the Petitioner. The Petitioner, without producing any credible material whatsoever and after giving detailed statements that he had no concern with M/s. Digital Storm, or that he was only carrying out a small stationery shop from the premises for which registration was obtained, now wants to raise a contradictory plea. Even such a plea is backed by no material. The learned counsel for the Petitioner almost suggests that there was no requirement to produce such material in these proceedings, and that, only if an appropriate show-cause notice were to be issued to the Petitioner, the Petitioner would have produced the same. The principles of natural justice cannot be placed in a straitjacket. Some prejudice must be shown. In this case, the Petitioner, on a technical plea that has not even been made good, seeks to challenge the impugned orders/decisions. For this, the Petitioner has shown no qualms about making false and contradictory statements on oath. There is no infirmity in the order dismissing Petitioner’s delay condonation application. The affidavit accompanying the same was replete with false and contradictory statements. It is possible that the Petitioner merely lent his name and the stationery shop address [ for monetary consideration] to some persons/relatives to set up an establishment to issue fake invoices and claim input tax credit. Petition dismissed with costs of only Rs. 5,000/-. This is because, from the photographs produced before us and the visit note, we find that the Petitioner’s stationery shop appears to be used by some parties to issue fake invoices. The Petitioner is 75 years old and, as per his own statement, is only involved in his small stationery store. Based on these prima facie circumstances, we are imposing costs of only Rs.5,000/-, which the Petitioner should pay within four weeks to the Government K.E.M. Hospital at Parel. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the cancellation of GST registration suffered from violation of principles of natural justice or non-compliance with the prescribed statutory procedure, including manner of service of notice and non-supply of visit note. 1.2 Whether the conduct of the Petitioner, including contradictory and false statements on affidavit, disentitled him to equitable relief under Article 226 of the Constitution of India. 1.3 Whether the order refusing to condone delay in filing the statutory appeal against cancellation of GST registration was vitiated by any legal infirmity, including incorrect reckoning of limitation and reliance on false or contradictory averments. 1.4 Whether the precedents relied upon by the Petitioner concerning cancellation of registration and principles of natural justice were applicable to the facts of the present case. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Alleged violation of natural justice and prescribed procedure in cancellation of GST registration Interpretation and reasoning 2.1 The Court examined the record, including the visit note prepared by the GST officials after visiting the address mentioned in the registration records. The note recorded that the Petitioner was present, that the purpose of the visit and authority were explained, his endorsement obtained, and that he stated he had no business activities related to the registered entity, was only running a small stationery shop, and that some relative might have misused his Aadhaar and photograph for GST registration. 2.2 The visit note further recorded that, on the Petitioner furnishing the relative's mobile number, the officials called that number; the call was answered but disconnected when questions about GST registration were raised. 2.3 The Court noted that in the writ proceedings, although the Petitioner alleged that the procedure was defective, that the visit note was not supplied, and that the show cause notice was only uploaded on the website, he did not produce any credible supporting material. The rejoinder was characterised as containing 'tall statements' without documents. 2.4 The Court found, on the basis of the record, that 'more than ample opportunities were granted' to the Petitioner during the cancellation proceedings. Despite such opportunities, no credible material was produced either before the authorities or before the Court to establish that the Petitioner was genuinely engaged in the business of the registered entity or that the alleged procedural lapses caused any prejudice. 2.5 The Court stressed that principles of natural justice cannot be placed in a straitjacket and that some prejudice must be shown. Here, the Petitioner sought to challenge the impugned orders on a technical plea of breach of natural justice which was 'not even made good', and without establishing any prejudice, while simultaneously attempting to retract from his earlier statements recorded in the departmental proceedings. 2.6 It was also expressly noted that this was not a case where the registration had been cancelled on a ground not referred to in the show cause notice, nor a case where the show cause notice was vague. The allegation in the notice was that registration had been obtained through 'suppression, fraud, and misrepresentation', and the material on record 'prima facie supports' these allegations. Conclusions 2.7 The Court held that the plea of breach of natural justice and non-compliance with prescribed procedure was misconceived; sufficient opportunity had been given, no prejudice was shown, and the cancellation of registration did not suffer from any violation of natural justice warranting interference under Article 226. Issue 2 - Effect of the Petitioner's conduct and contradictory statements on entitlement to relief under Article 226 Interpretation and reasoning 2.8 At the outset, the Court recorded that, on the facts, the Petitioner's conduct did not entitle him to equitable relief under Article 226 of the Constitution. 2.9 The Court considered the Petitioner's statements at different stages: (i) his recorded statement at the time of the visit, disclaiming any connection with the registered entity and asserting he only ran a small stationery shop, and (ii) later pleadings wherein he claimed transparency and full cooperation, denied having made the earlier statement, and asserted that the department's version was misconceived, arbitrary, and unverified. 2.10 The rejoinder affidavit was found to contain serious allegations against the department but no supporting documents. There was also no assertion that the contents were read over and explained to the Petitioner, which the Court deemed necessary given the defences previously raised by him. 2.11 In the affidavit filed before the appellate authority seeking condonation of delay, the Petitioner admitted that an investigation had been carried out in May 2023 and stated that 'during the course of such mentioned procedure, I was not of stable mind at that time to give any statement.' However, in the writ petition he pleaded that he filed GST returns in May 2023, and in the rejoinder he repeatedly claimed transparency and cooperation, without any 'unstable mind' plea. 2.12 The Court noted that these were plainly contradictory defences raised in different proceedings without explanation. It accepted the Respondents' contention that the Petitioner was 'blowing hot and cold' and making 'false and contradictory statements on affidavit to suit the occasion.' 2.13 The Court regarded the writ petition as 'an abuse of the judicial process' and agreed that, in such circumstances, exemplary costs were warranted, while modulating the amount in view of the Petitioner's age and apparent economic condition. Conclusions 2.14 The Court held that, because of the Petitioner's inconsistent and false stands and abuse of process, he was not entitled to discretionary and equitable relief under Article 226. The petition was liable to be dismissed with costs. Issue 3 - Validity of refusal to condone delay in filing appeal against cancellation of registration Interpretation and reasoning 2.15 The Petitioner challenged the appellate order refusing condonation of delay, contending inter alia that the appellate authority wrongly reckoned the limitation from the date of the original order and not from its communication, and that the rejection order was perverse. 2.16 The Court referred to the affidavit filed by the Petitioner before the appellate authority for condonation of delay and found it 'replete with false and contradictory statements,' particularly the plea of being of unstable mind at the time of giving statement, which was inconsistent with his other pleadings and conduct. 2.17 In light of these contradictions and the absence of credible justification, the Court held that there was no infirmity in the order rejecting the condonation application. The Court did not accept the Petitioner's criticism that the appellate authority proceeded on an improper basis in reckoning limitation or otherwise. Conclusions 2.18 The Court upheld the refusal to condone the delay in filing the appeal and found no legal error in the appellate authority's order warranting interference. Issue 4 - Applicability of cited precedents on natural justice and cancellation of registration Interpretation and reasoning 2.19 The Petitioner relied on decisions of this Court and another High Court to contend that cancellation of registration on grounds not mentioned in the show cause notice, or on vague notices, or without proper compliance with procedural safeguards, would vitiate the cancellation. 2.20 The Court held that these decisions had 'no application to the gross facts of the present case,' because: (i) the show cause notice in this case specifically alleged that registration was obtained through suppression, fraud, and misrepresentation; (ii) the notice could not be said to be vague; and (iii) the cancellation was not based on any ground outside the notice. Additionally, the material on record prima facie supported the allegations in the show cause notice. Conclusions 2.21 The precedents relied upon by the Petitioner were distinguished as factually inapplicable, and no ground was made out on the strength of those authorities to interfere with the cancellation of registration or the appellate order. Overall result and consequential directions 2.22 The petition was dismissed with costs of Rs. 5,000/-, payable within four weeks to a specified government hospital, having regard to the Petitioner's age and the prima facie indication that his small stationery shop premises may have been used by others to issue fake invoices. The Petitioner was directed to file an affidavit of compliance and furnish a copy to the Respondents' counsel.