Temporary suspension of business operations due to ill health does not justify cancellation of taxpayer’s GST registration: Delhi HC

The Supreme Court held that the only allegation against the taxpayer was that it did not exist, which was sufficiently addressed by the taxpayer in his reply by claiming that he had to go to Rajasthan due to the ill health of his father.

Moreover, at the relevant time when the department had scheduled a visit, the taxpayer was traveling to Rajasthan and as a result, his place of business was closed and the taxpayer was presumed not to exist, the Court added.

Thus, the Supreme Court held that temporary suspension of business activities due to ill health would not justify revocation of the taxpayer’s GST registration.

The Division Bench of Judge Yashwant Varma And Justice Ravinder Dudeja noted that the retroactive withdrawal of GST registration has a cascading effect as the concerned authorities would also deny input tax credit to other taxpayers who may have received supplies from the taxpayer.

Facts of the case

An inquiry was conducted in respect of non-genuine taxpayers, as part of special effort for verification of GSTINs, and the officials of Anti Evasion, CGST, visited the premises of the assessee/petitioner. During such a visit to the registered address, it was determined that the suspect did not exist. Therefore, a Show Cause Notice in Form GST REG-17 was issued, resulting in retrospective cancellation of registration.

Supreme Court Comments

The Bench noted that in terms of Section 29(2) of the CGST Act, the authorized officer may cancel the GST registration of any person from that date, including any date with retrospective effect, in his discretion, if the circumstances set out in the mentioned section are satisfied.

However, the registration cannot be withdrawn retrospectively and can be withdrawn upon objective satisfaction of the competent officer, the Bench added.

Although the SCN requires the assessor to appear before the undersigned, i.e. the authority issuing the notice, the court held that the notice does not mention the name of the officer or the place where the assessor would appear.

Therefore, the basis of the proceedings i.e. SCN is defective as no effective opportunity of hearing was granted to the Assessing Officer before passing the final judgment on the show Cause Notice, the Bench added.

Noting that the circular/instructions issued by the Ministry are binding on the departmental authorities, the Bench explained that the Ministry cannot take a contrary stand and cannot reject a circular even on the ground that it was contrary to the statutory provisions and thus with the effective Since the right to be heard has been denied to the assessing officer, the order is contrary to the principles of natural justice.

Since the order is completely silent on even any inquiry conducted, the Supreme Court directed the tax department to reinstate the GST registration of the assessee and dismissed the petition.

Counsel for the petitioner/accused: Sumit K. Batra, Manish Khurana, Priyanka Jindal and Siddhanth Sarwal

Counsel for Respondent/Revenue: Akshay Amritanshu, Samyak Jain, Drishti Saraf and Pragya Upadhyay

Case Title: Ram Niwas vs. Commissioner of Central Goods and Services Tax & Anr

Case number: WP(C) 13450/2024

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