2026 (1) TMI 422 - HC - GST

Suspension of GST officer over alleged fraudulent ITC facilitation and registration cancellation quashed; disciplinary action to finish in 3 months

The dominant issue was whether a suspension order against a public officer, premised on alleged facilitation of fraudulent ITC claims running into crores ... Validity of suspension order - fraudulent claim of ITC, while claiming ITC to the crores of rupees - cancellation of GST registration - HELD THAT:- Importantly, on 18.03.2024, an application came to be filed by the assessee for GST registration which was accorded deemed approval on 18.04.2024 and physical inspection was conducted and report was submitted by the writ petitioner on 21.06.2024 and based upon the said report, on 01.07.2024 show cause notice was issued by the Assistant Commissioner (Proper Officer) and on 20.09.2024 the ITC was claimed and on 24.10.2024, the GST registration was cancelled. Be that as it may be, since a report had already been submitted but the writ petitioner on 21.06.2024, a show cause notice was issued and ITC was claimed fraudulently on 20.09.2024, thus, prima facie, the Court is of the opinion that the suspension need not be continued. The suspension order dated 30.11.2025 is set aside - Quashing of the suspension order would not preclude the respondents from conducting disciplinary proceedings and concluding the same within a period of three months from today. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the impugned suspension order was justified to be continued, having regard to the material on record concerning the officer's role in the events leading to a fraudulent input tax credit claim by an assessee. (ii) Whether setting aside the suspension should nonetheless permit the authorities to proceed with and conclude disciplinary proceedings within a fixed timeframe. (iii) Whether, upon setting aside the suspension, the officer was entitled to subsistence allowance for the period during which the suspension remained operative, subject to statutory conditions. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Sustainability/continuance of the suspension order Legal framework: The Court considered the administrative basis of suspension in the context of alleged misconduct linked to a fraudulent claim of input tax credit by an assessee. The judgment records submissions referring to departmental circulars concerning timelines for post-deemed approval physical inspection, but the Court's determination rested on the sequence of actions and the officer's report and its consequences, rather than on a definitive interpretation of those circulars. Interpretation and reasoning: The Court examined the admitted chronology: an application for registration was followed by deemed approval; a physical inspection was subsequently conducted by the officer and an adverse report was submitted; a show cause notice was issued by the competent authority; the registration was not suspended at that stage; thereafter the assessee fraudulently claimed input tax credit; and later the registration was cancelled. On these facts, the Court formed a prima facie view that since an adverse inspection report had already been submitted and action thereafter lay with the proper officer who issued the show cause notice but did not suspend the registration, the suspension of the officer 'need not be continued'. Conclusion: The Court set aside the suspension order, holding that on the material sequence of events, continuation of suspension was not warranted. Issue (ii): Effect of quashing suspension on disciplinary proceedings; time-bound conclusion Interpretation and reasoning: While quashing the suspension, the Court expressly preserved the employer's power to conduct disciplinary proceedings arising out of the same episode. It balanced reinstatement from suspension with administrative accountability by directing expeditious completion and recording the officer's stated willingness (through counsel) to participate. The Court also provided for the contingency of non-cooperation by the officer, directing that unnecessary adjournments should not derail timely completion. Conclusion: Quashing of suspension was ordered without precluding disciplinary proceedings, which were directed to be concluded within three months; in case of non-participation or unnecessary adjournments by the officer, the authority was to conclude proceedings within three months thereafter. Issue (iii): Subsistence allowance for the period of suspension until it was set aside Interpretation and reasoning: Upon setting aside the suspension, the Court directed payment of subsistence allowance for the operative suspension period up to the date it was annulled, expressly conditioning payment on fulfillment of statutory requirements. Conclusion: The officer was held entitled to subsistence allowance from the date of suspension till the date it was set aside, subject to statutory provisions.