Shyam Sundar Sita Ram Traders VS  State Of U.P

The petitioner, represented by Sri Pranjal Shukla, learned Counsel, challenges two orders: one dated 17.05.2021 by the Assistant Commissioner of Commercial Tax, Bareilly, rejecting the application for revocation of cancellation of registration, and another dated 14.09.2021 by the Additional Commissioner of Commercial Tax, dismissing the appeal.

Case Background:

1. Business and Registration:
2. • The petitioner operates a registered proprietorship firm compliant with relevant Acts and Rules.
   • On 15.12.2020, the firm changed its business address and submitted an amendment application, which was approved on 09.02.2021.
   • Survey and Show Cause Notice:
   • On 03.01.2021, the department conducted a survey at the previous business address and found no activity.
     • A show cause notice was issued on 11.02.2021, alleging the firm was not operating at the registered address and was liable for cancellation of registration based on STF information.

2. Cancellation of Registration:
   • The firm’s registration was canceled on 31.03.2021 due to non-existence at the registered address and alleged involvement in availing fake ITC credit from a bogus firm.
   • The petitioner’s reply to the show cause notice was deemed unsatisfactory, and it was noted that the amendment was considered an afterthought since it was not presented before the survey.
3. Application for Revocation:
   • The petitioner applied for revocation of the cancellation under Section 30 of the GST Act.
   • Without issuing a prior show cause notice, the application was rejected on 17.05.2021, mentioning that no reply was submitted to the notice dated 22.04.2021.
4. Appeal and Dismissal:
   • The petitioner’s appeal against the rejection order was dismissed on the grounds that ITC reversal orders were passed based on information from various sources, and no business activity was found during the survey.

Legal Argument:

The petitioner’s Counsel argues that the cancellation of registration should only occur under conditions specified in sub-section 2 of Section 29 of the GST Act. The counsel contends that these conditions were not met in the present case.

The Court heard the petitioner’s arguments and the defense from the learned Standing Counsel, focusing on whether the proper procedures and conditions for canceling the registration were followed as per the GST Act.

The present petition was filed by the petitioner challenging two orders: the first order dated 17.05.2021, issued by the Assistant Commissioner, Commercial Tax, Bareilly, which rejected the petitioner’s application for revocation of the cancellation of registration, and the second order dated 14.09.2021, issued by the Additional Commissioner, Commercial Tax, which dismissed the appeal against the first order.

The petitioner, represented by Counsel Pranjal Shukla, contends that the petitioner is a registered proprietorship firm compliant with relevant laws and regulations. On 15.12.2020, the petitioner changed its business address and submitted an amendment application, which was approved on 09.02.2021. However, on 03.01.2021, a survey conducted at the previous business address found that the firm was not operating from the registered location. Consequently, a show cause notice was issued on 11.02.2021, alleging that the firm’s registration was subject to cancellation due to non-existence at the registered address.

The petitioner’s registration was subsequently cancelled on 31.03.2021, citing the firm’s involvement in availing fake Input Tax Credit (ITC) from a bogus firm and the lack of business activity at the registered address during the survey. The petitioner filed an application under Section 30 of the GST Act to revoke the cancellation, but it was rejected on 17.05.2021 without prior issuance of a show cause notice. This order noted the petitioner’s failure to respond to a notice dated 22.04.2021. The petitioner’s appeal against this decision was dismissed, primarily based on findings from various sources indicating ITC reversals and the non-existence of the firm during the survey.

The petitioner’s counsel argued that the cancellation of registration can only occur under specific conditions outlined in Section 29(2) of the GST Act. The counsel emphasized that non-availment of ITC credit, as alleged, is not a valid ground for cancellation under the specified conditions. The counsel also referenced judgments from similar cases, such as DRS Wood Products Lucknow vs. State of U.P. and Apparent Marketing Private Limited vs. State of U.P., to support the argument that the firm’s non-existence at the surveyed location was the sole allegation in the show cause notice, which is insufficient for cancellation.

Additionally, the counsel highlighted the contradictory stance of the respondents: while claiming the firm’s non-existence, they simultaneously initiated recovery of allegedly wrongly availed ITC under Section 74 of the CGST Act. The respondent’s counsel argued that the firm’s absence during the survey and the subsequent approval of the amendment application were post-survey and thus an afterthought.

Upon reviewing the case, the court found errors in the respondents’ decisions. The court noted that once registration is granted, it can only be cancelled based on conditions specified under Section 29(2), and the allegation of being a bogus firm is not among these conditions. Referencing the Apparent Marketing Private Limited case, the court concluded that the orders rejecting the revocation application and dismissing the appeal were incorrect exercises of power by the department. Consequently, the court set aside the impugned orders dated 17.05.2021 and 14.09.2021.

The present petition challenges two orders: the first, dated 17.05.2021, issued by the Assistant Commissioner of Commercial Tax in Bareilly, which rejected the petitioner’s application to revoke the cancellation of their registration; and the second, dated 14.09.2021, issued by the Additional Commissioner of Commercial Tax, dismissing the appeal against the first order.

The petitioner, represented by Counsel Pranjal Shukla, argues that the firm is a registered proprietorship operating in compliance with applicable laws. On 15.12.2020, the petitioner changed its business address and filed an amendment application, which was approved on 09.02.2021. However, on 03.01.2021, a survey conducted at the previous address revealed that the firm was not operating from the registered location. As a result, a show cause notice was issued on 11.02.2021, alleging that the registration was subject to cancellation due to the firm’s non-existence at the registered address.

Subsequently, the firm’s registration was canceled on 31.03.2021, with the reason being that the firm was found to be involved in availing fake Input Tax Credit (ITC) from a bogus firm and was not conducting business at the registered address during the survey. The petitioner then filed an application under Section 30 of the GST Act to revoke the cancellation, but this application was rejected on 17.05.2021 without prior issuance of a show cause notice. The rejection order noted that no reply had been submitted to a notice dated 22.04.2021. The petitioner’s appeal against this rejection was dismissed, based on findings from various sources indicating ITC reversals and the non-existence of the firm during the survey.

The petitioner’s counsel contends that registration can only be canceled under specific conditions outlined in Section 29(2) of the GST Act. They argue that non-availment of ITC credit, as alleged, does not constitute a valid ground for cancellation under these conditions. The counsel references judgments from similar cases, such as DRS Wood Products Lucknow vs. State of U.P. and Apparent Marketing Private Limited vs. State of U.P., to support the argument that the firm’s non-existence at the surveyed location was the only allegation in the show cause notice, which is insufficient for cancellation.

Additionally, the petitioner’s counsel points out the contradictory stance of the respondents: while claiming the firm’s non-existence, they simultaneously initiated recovery of the allegedly wrongly availed ITC under Section 74 of the CGST Act. The respondent’s counsel argues that the firm’s absence during the survey and the subsequent approval of the amendment application were post-survey and thus an afterthought.

Upon reviewing the case, the court found errors in the respondents’ decisions. The court noted that once registration is granted, it can only be canceled based on conditions specified under Section 29(2), and the allegation of being a bogus firm is not among these conditions. Referencing the Apparent Marketing Private Limited case, the court concluded that the orders rejecting the revocation application and dismissing the appeal were incorrect exercises of power by the department. Consequently, the court set aside the impugned orders dated 17.05.2021 and 14.09.2021.

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Allahabad High Court 

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