GST Registration Cancellation Revoked for Composition Taxpayer Due to cancellation order incorrectly applied Section 29(2)(c) of the CGST Act, which pertains to regular taxpayers,

Summary in Key Points:

Issue: Whether the cancellation of a GST registration for a composition taxpayer was valid when the cancellation order was based on a provision applicable to regular taxpayers.
Facts: The assessee’s registration was cancelled for non-filing of returns for six months. The assessee, registered under the Composition Scheme, argued that the cancellation order incorrectly applied Section 29(2)(c) of the CGST Act, which pertains to regular taxpayers, instead of Section 29(2)(b), which applies to composition taxpayers.
Decision: The High Court set aside the cancellation order, holding that it was based on an incorrect provision and was a non-speaking order, violating the principles of natural justice.

Decision:

The High Court ruled in favor of the assessee, setting aside the cancellation order and remanding the matter for fresh consideration. The court emphasized the following:

Incorrect Application of Law: The cancellation order incorrectly applied Section 29(2)(c), which deals with regular taxpayers, instead of Section 29(2)(b), which is specific to composition taxpayers.
Non-Speaking Order: The cancellation order was a non-speaking order, meaning it did not provide any reasons or justification for the cancellation. This violated the principles of natural justice, as the assessee was not given a clear understanding of the grounds for the cancellation.
Revocation of Cancellation: The court set aside the cancellation order and directed the authorities to reconsider the case in light of the correct legal provisions applicable to composition taxpayers.

Important Note: This case highlights the importance of applying the correct legal provisions and providing reasoned orders in GST proceedings. The High Court’s decision emphasizes that cancellation orders must be based on proper legal grounds and must clearly state the reasons for cancellation to ensure fairness and transparency. This case also serves as a reminder to tax authorities to be mindful of the distinction between different categories of taxpayers and apply the relevant provisions accordingly.

HIGH COURT OF ALLAHABAD

Sky Associates

State of U.P.

Arun Bhansali, CJ.
and Vikas Budhwar, J.

WRIT TAX No. – 2140 of 2024

DECEMBER 10, 2024

Akhil Agnihotri, for the Petitioner. Nimai Dass, ACSC for the Respondent.

ORDER

1. This writ petition is directed against order dated 15.3.2024 passed by the respondents whereby GST registration of the petitioner has been cancelled.

2. It is inter-alia indicated that petitioner is registered under the Goods and Service Tax Act, 2017 (‘Act, 2017’) having GSTIN No.09EZRPS4978B1Z1. A show cause notice was issued to the petitioner dated 6.2.2024 for cancellation of the registration on the common portal. The reason indicated in the notice was that the petitioner has not filed return for a continuous period of six months. It is claimed that notice was sent on the common portal, which the petitioner did not see, being unaware of the same and for lack of response, the impugned order dated 15.3.2024 ordering for cancellation of the registration was passed by the authority.

3. The petitioner became aware of the said aspect when it received the said information while dealing with the Railways wherein, it was indicated that its GST registration has been cancelled. The petitioner approached the respondents seeking revocation of the cancellation. However, the same has been refused.

4. Submission has been made that the petitioner is registered under the Composition Scheme and is required to file one quarterly return (GSTR 4) and one annual return (GSTR 9A), however, the show cause notice issued to the petitioner, pertained to non filing of return for a continuous period of six months, which is not applicable to the case of the petitioner. However, the order of cancellation indicated the status of the petitioner as person, other than paying tax under Section 10 having been failed to furnish returns for prescribed periods under Section 29(2)(c) of the Act, 2017, which provision also is not applicable to the case of the petitioner.

5. Submission has been made that the order passed besides being non speaking reflects non application of mind inasmuch as the purported failure of the petitioner to file return, in terms of Section 29(2)(c) of the Act, 2017 is not applicable.

6. It is submitted that the case of the petitioner, would be governed by provisions of Section 29(2)(b) of the Act, 2017, which pertains to a person paying tax under Section 10 of the Act, 2017.

7. It is further submitted that as the show cause notice and the order impugned passed by the respondents, have been issued under wrong impression by treating the petitioner as person other than covered under Section 10 of the Act, 2017, the same deserves to be quashed and set aside.

8. Learned counsel for the respondents made submissions that nowhere in the petition any averment pertaining to the status of the petitioner as registered under Section 10 of the Act, 2017 has been made. However, it is not denied that the order passed is non speaking.

9. In the circumstances of the case wherein, the claim made by the petitioner is that it is covered under Section 10 of the Act, 2017 and as such, issuance of notice itself is incorrect, and the order impugned dated 15.3.2024 ordering for cancellation of registration is non speaking, the same is quashed and set aside.

10. The matter is remanded back to the jurisdictional authority, the petitioner would appear before the said authority and file response to the show cause notice dated 6.2.2024 raising all pleas as sought to be raised in the present petition, including the fact that it is registered under the provisions of Section 10 of the Act, 2017.

11. On petitioner’s appearing before the authority, the authority shall hear the petitioner and pass a fresh order in accordance with law. The petitioner in the first instance shall appear before the authority on 24 December, 2024.

12. With the above directions, the petition stands disposed of.