GST Registration not cancellable by merely describing the firm as “Bogus”: Allahabad High Court

GST Registration is not cancellable by merely describing the firm as “Bogus”: Allahabad High Court

In the case of Apparent Marketing Private Limited Vs State Of U.P., Allahabad High Court held that no GST registration may be cancelled by merely describing the firm that had obtained it, as ‘bogus’. The word “bogus” has not been used by the statute.

FACTS:

The assessee applied for and was granted registration under the UP GST Act, 2017 (hereinafter referred to as the ‘Act’) on 17.08.2017 for trading in Pan Masala and Tobacco. The assessee claims to have filed its return on time and it also claims to have deposited the due tax. A survey was conducted at the assessee’s business premises on 15.12.2017. Those premises were found closed. Another survey was conducted at the assessee’s business premises on 16.02.20 18. However, no adverse material is claimed to have been discovered during the survey proceedings. Besides the above two surveys, the assessee claims to have cooperated in certain proceedings against a third party where it had been summoned under Section 70 of the Act.

The assessee received a notice through an e-portal of the revenue department on 22.07.2020 issued under Section 29 of the Act whereby the registration granted to the assessee under the Act was proposed to be cancelled for the following solitary reason: “Your firm was found bogus in an inspection of SIB. Information received from headquarters.”

After that, the Assistant Commissioner, State-Tax, cancelled the petitioner’s GST registration without disclosing any further reason. The assessee applied to revoke the cancellation in response, and the Assistant Commissioner rejected that. Then, the assessee filed an appeal against the order of the Assistant Commissioner, and the same was dismissed by the Appellant Authority (AA). Finally, the assessee filed a writ petition before the High Court against the order of the AA.

HELD

The Hon’ble Allahabad High Court held:

Having heard learned counsel for the parties and having perused the record, in the first place, cancellation of registration has serious consequences. It takes away the fundamental right of a citizen etc. to engage in lawful business activity. In the present case, undisputedly, the registration claimed by the assessee had been granted by the respondent authority. Therefore, a presumption does exist as to such registration having been granted upon due verification of necessary facts. If the respondent proposed to cancel the registration thus granted, a heavy burden lay on the respondent’s authority to establish the existence of facts as may allow for such cancellation of registration. Section 29(2) of the Act reads as below :

“Section 29. Cancellation of suspension of registration

(1) …

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,-

(a) a registered person has contravened such provisions of the Act or the rules made there under as may be prescribed; or

(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

1. c) Any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d) Any person who has taken voluntary registration under sub­section (3) of section 25 has not commenced business within six months from the date of registration; or

(e) Registration has been obtained by means of fraud, willful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Also, the Court added Since the statute has not used the word ‘bogus’, the Court ruled that registration under the Act cannot be cancelled by merely describing the firm as bogus.

The Court ruled that the notice seeking to cancel the petitioner’s GST registration remained defective as the reason for cancellation does not fall under Section 29(2) of the UP GST Act. Hence, the High Court allowed the petition and set aside the order passed by the Assistant Commissioner, State-Tax, cancelling the petitioner’s GST registration.