APPARENT MARKETING Pvt. Ltd. vs STATE OF UP

GST Revocation of cancellation of Registration Allegations levied of a bogus firm By merely describing the assessee firm as “bogus”, the respondent authority did not make known to the assessee the exact charge that was being levelled against the assessee. ALLAHABAD HIGH COURT Correspondingly, the respondent authority deprived the assessee of the necessary opportunity to rebut the charge. It is equally remarkable to note that the Appeal Authority also chose to consider the matter on merits. Violation of the principle of natural justice. Order set aside by ALLAHABAD HIGH COURT Brief about the case: Notice issued in this case was one liner: “Your firm was found bogus in the inspection of SIB. Information received from headquarter.” 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.

Therefore, the registration once granted could be cancelled only if one of the five statutory conditions was found present. Per se, no registration may be cancelled by merely describing the firm that had obtained it, was “bogus”. The word “bogus” has not been used by the statute. The only contingency to which such expression may relate may be one appearing under Clauses (c) and (d) of Section 29(2) of the Act being where a registered firm does not commence its business within six months of its registration. Other than that, the term “bogus” may also refer to a satisfaction contemplated by Section 29(2)(c) of the Act where registration may be cancelled if the registered firm has not furnished its return for a continuous period of six months. Those conditions have not been shown to exist in this case. Registration having been granted earlier, the obligation existed on the authority to specify the exact reason/charge on which it proposed to cancel the registration. In the present case, unless the respondent authority had first specified the reason why it proposed to cancel the registration and unless the authority had specified the reason why it was attempting to treat the assessee firm “bogus” i.e. whether the reference was being made to Section 29(2)(c) or Section 29(2)(d) of the Act, by specifically stating the facts as may give rise to that charge and unless the supporting material giving rise to that charge had been referred to in that notice, the notice itself remained defective in material aspect. In the present case, by merely describing the assessee firm “bogus”, the respondent authority did not make known to the assessee the exact charge that was being levelled against the assessee. Correspondingly, the respondent authority deprived the assessee of the necessary opportunity to rebut the charge – It is equally remarkable to note that the Appeal Authority also chose to consider the matter on merits. Though the appeal is a continuation of original proceedings and it may have been open to the Appeal Authority to hear and decide the matter on merits, however, in absence of any legally permissible reason given by the original authority, the only proper course the Appeal Authority may have adopted, may have been to set aside the orders of Assistant Commissioner, Ghaziabad and Appellate Authority.

1. Heard Sri Praveen Kumar, learned counsel for the petitioner-assessee and Sri Jagdish Mishra, learned Standing Counsel for the revenue.

2. Present writ petition has been filed by the assessee to assail the order dated 12.02.2021 passed by the Appeal Authority in Appeal No. GST/994/2020 for A.Y. 2020-21 and the orders dated 21.08.2020 and 13.08.2020 passed by the Assistant Commissioner, Sector-14, State Tax, Ghaziabad.

3. In short, the assessee applied for and was granted registration under the UP GST Act, 2017 (hereinafter referred to as the ‘Act’) w.e.f. 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 16.02.2018. However, no adverse material is claimed to have been discovered during that survey proceedings. Besides the above two survey, the assessee claims to have cooperated in certain proceedings against a third party where under it had been summoned under Section 70 of the Act.

4. In the above background, the assessee received a notice through eportal 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 inspection of SIB. Information received from headquarter.”

5. The assessee was required to furnish its reply within seven working days and to appear before that authority on 24.07.2020 at 11:00 a.m. Undeniably, the assessee did not make compliance of the aforesaid notice. However, no order was passed on 24.07.2020. Also, no further notice was issued to the assessee in that proceeding. On 13.08.2020, the respondent authority cancelled the assessee’s registration without disclosing any further reason. The relevant extract of the order reads as below :

“Order for Cancellation of Registration

This has reference to your reply dated 31/07/2020 in response to the notice to show cause dated 22/07/2020;

Whereas no reply to notice to show cause has been submitted;

Whereas the undersigned has examined your reply and submissions made at the time of hearing and is of the opinion that your registration is liable to be cancelled for following reason(s).

1. No Reply about SCN that Your firm was found bogus in inspection of SIB. Information received from headquarter. The effective date of cancellation of your registration is 13/08/2020”

6. Being aggrieved, the assessee filed an application for revocation of the aforesaid order (under Section 30 of the Act). In response to the above, the assessee received a notice dated 21.08.2020 expressing the tentative opinion of the authority against the grant of revocation. In any case, it required the assessee to furnish its reply to the unspecified notice within seven working days. It was further indicated, upon failure to furnish reply and upon failure to appear for personal hearing on the appointed date and time, the case could be decided ex parte. Remarkably, no date or time was fixed for personal appearance/hearing. In any case, the assessee uploaded its written reply on 21.08.2020 itself. Without issuing any further communication and without fixing any date for personal hearing, on 21.08.2020 itself, the respondent authority passed the order, rejecting the application for revocation of cancellation of registration. That order reads as below.

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