Suspension of GST Registration Revoked Pending Enquiry into Alleged Non-Supply

Summary in Key Points:

Show Cause Notice: The assessee received a show cause notice proposing cancellation of their GST registration for allegedly issuing invoices without supplying goods or services.
Assessee’s Response: The assessee replied, asserting compliance with GST laws, regular tax payments, and no fraudulent activities.
Suspension of Registration: However, the Revenue suspended the assessee’s GST registration before considering their response, hindering their business operations.
Court’s Intervention: The High Court deemed the suspension too harsh, as it prevented the assessee from conducting business while the enquiry was ongoing.

Decision:

The High Court directed the Revenue to revoke the suspension of the assessee’s GST registration. It emphasized the need to consider the assessee’s reply and conduct a proper enquiry before taking such drastic action. This decision safeguards the assessee’s business interests while ensuring due process is followed in investigating the allegations.

HIGH COURT OF KARNATAKA

Haradiya Enterprises

Superintendent of Central Tax

M.I. Arun, J.

WRIT PETITION NO. 33165 OF 2024 (T-RES)

DECEMBER 17, 2024

Jagadishchandra Kamath K., Adv. for the Petitioner. Jeevan J. Neeralgi, Adv. for the Respondent.

ORDER

1. The petitioner is a dealer registered under the provisions of the Karnataka Goods and Services Act/Central Goods and Services Act, 2017. Respondent has issued a show cause notice dated 14.10.2024 to the petitioner for cancellation of registration of GST, the same reads as under:

“Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:

1. Rule 21(b)-person issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder

You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.

You are hereby directed to appear before the undersigned authority on 18/10/2024 at 11:30.

If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed dated and time, the case will be decided ex parte on the basis of available records and on merits.

Please note that your registration stands suspended with effect from 14.10.2024.”

2. The petitioner submits that pursuant to the show cause notice, he has appeared before the respondent and he has submitted his reply and also gave several representations to the show cause notice showing how he has been regular in payment of GST and has not committed any default and has not fraudulently claimed any input tax credit nor he has violated any provisions of any law. His grievance is that instead of considering his reply and passing the appropriate orders, by way of impugned show cause notice with effect from 14.10.2024 itself his GST registration has been suspended and he is not in a position to carry on his business.

3. Learned counsel appearing for the respondent justifies the action of the respondent in suspending the GST registration of the petitioner and prays for dismissal of the writ petition.

4. Admittedly, the petitioner is a registered dealer under the provisions of GST. The respondent has initiated an enquiry into certain alleged irregularities committed by the petitioner. The petitioner has replied to the said show cause notice. Under the said circumstances, in my opinion, it would be appropriate for the respondent to consider the reply of the petitioner and thereafter pass suitable orders in accordance with law and the act of respondent in suspending the GST registration of the petitioner pending enquiry would be too harsh on the petitioner as he would not be in the position to conduct his business and the enquiry may take some time. Hence, the following:

ORDER

(i)

The respondent is hereby directed to revoke the suspension of the GST registration of the petitioner which has been done as per show cause notice dated 14.10.2024 (vide Annexure-A to the writ petition) forthwith;

(ii)

However, respondent is granted the liberty to take appropriate decision on revoking the GST registration of the petitioner or suspending it or otherwise after considering the reply of the petitioner to the show cause notice. Same shall be done by the respondent in accordance with law;

(iii)

The writ petition is disposed of accordingly.