The Allahabad High Court has granted 10 days time to GST dept. to provide documents mentioned in Show Cause Notice (SCN) issued proposing cancellation of GST registration.
The bench of Justice Sangeeta Chandra and Justice Brij Raj Singh has observed that show cause notice that was issued to the petitioner therein on 16.05.2023 had alleged that the petitioner’s GST registration was proposed to be cancelled on account of fraud, willful misstatement or suppression of facts. However, it did not provide any specific reason as to the alleged fraud, wilful misstatement and it did not provide any clue as to the facts which were allegedly suppressed by the petitioner.
Background
A raid was conducted in the principal place of the business of the petitioner’s firm dealing only with FMCG products. The Sales Manager of the said firm was interviewed and he had stated that he has been working in the firm for the past two years and he had never seen any trading being done in iron or paper scrap. There were huge mismatches between the amount of inward and outward supplies. The inward supply shown by the petitioner is of Rs.8,87,37,536, whereas the outward supply is to the tune of Rs.26,10,90,756.
The description given in the e-way bills and the tax invoices show that the petitioner is dealing with waste and scrap paper, iron waste and scrap and also waste and scrap of plastic. The outward supplies of M/s Baba Industries have also been found to be either non-existent upon verification or have been found to be operated by Deepanshu Srivastava and his associates. Search operations having been carried out on 30.01.2024 on the principal place of business, it was found that the petitioner was running fake and fraudulent operations only for the purpose of generating fake ITCs to be utilised further by his associates.
The show cause notice that was issued to the petitioner therein on 16.05.2023 had alleged that the petitioner’s GST registration was proposed to be cancelled on account of fraud, willful misstatement or suppression of facts. However, it did not provide any specific reason as to the alleged fraud, wilful misstatement and it did not provide any clue as to the facts which were allegedly suppressed by the petitioner. The petitioner had responded to the said show cause notice denying all the allegations.
The petitioner/assessee has filed the petition challenging the cancellation of GST registration. The assessee contended that no reasons have been assigned in the order requiring the petitioner to show cause for cancellation of registration. Even for suspension as per Section 29(2) of the Central Goods and Service Tax Act, 2017 read with Rule 21-A(2) of the rules made thereunder, the word reason to believe required satisfaction to be recorded that the registration is liable to be cancelled but the show cause notice itself is cryptic and bereft of any recital as regards the material even prima facie which may have been considered for issuance of the show cause notice and for suspension of the registration.
However, in the last line of the show cause notice, it is mentioned – “kindly refer to the supportive documents attached for case specific details”, but the petitioner has not received the documents.
Arguments
The petitioner contended that there is no mention in the show cause notice about what type of fraud, willful miss-statement or suppression of facts has been committed, therefore, the notice is illegal. It has also been mentioned about absence of any material in respect of the allegations in these show cause notice, on account of which, he is unable to file a proper, effective and detailed reply.
The department contended that the petition against show cause notice is not maintainable. The show cause notice issued under Section 29 of the Central Goods and Service Act. If there is sufficient material while issuing the show cause notice for suspending the registration of a trader, such suspension order can also be passed simultaneously with the show cause notice. The petitioner has not yet submitted his reply to the show cause notice and if the petitioner submits his reply, the same shall be considered and appropriate order shall be passed thereon in accordance with law.
The assessee contended that initially it had given a reply to the show cause notice and then again an additional reply and in both the replies, the petitioner has asked for documents which have been referred to containing specific details as mentioned in the show cause notice. The documents have not been supplied till date.
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Conclusion
The court while disposing of the petition held that interest of the petitioner can be sufficiently protected if a direction is issued to opposite party no.3 to provide all documents to the petitioner which have been referred to in the show cause notice, on the basis of which the show cause notice dated 22.03.2024 was issued to the petitioner, within ten days from today. The petitioner on receipt of documents, shall submit his reply/additional reply within ten days. The competent authority shall take into account the reply of the petitioner and then pass a reasoned and speaking order within a period of two weeks from the date of submission of the additional reply by the petitioner.
Case Title: M/S Baba Industries Versus Union Of India
Case No.: WRIT TAX No. – 85 of 2024
Date: 4.9.2024
Counsel For Petitioner: Mukesh Kumar Tewari,Devam Shukla,Vijay Dixit
Counsel For Respondent: Anindya Shastri, Dipak Seth
