Delhi High Court Quashes Show Cause Notice for Suspension of GST Registration

Case Name:

M/S Kundan Impex vs. Principal Commissioner of Department of Trade and Taxes, Government of NCT of Delhi (High Court of Delhi)

W.P.(C) 164/2024

Key Takeaways:

1. The show cause notice for suspension of GST registration was quashed due to lack of requisite details and clarity on the allegations.

2. The respondent was allowed to take further action, including cancellation of registration with retrospective effect, provided proper procedures are followed.

3. The petitioner was given the option to apply for cancellation of registration in accordance with the law.

Summary of Judgment:

1. The petitioner challenged the show cause notice dated 05.07.2023, which had suspended the petitioner’s GST registration and sought a direction to cancel the registration from the date when the last return was filed in July 2023.

2. The petitioner’s counsel argued that the show cause notice lacked specific reasons and details, only referring to a letter dated 12.06.2023, which was not provided to the petitioner.

3. The court issued notice, which was accepted by the respondent’s counsel, and the petition was taken up for final disposal with the consent of the parties.

4. The respondent’s counsel produced the letter dated 12.06.2023 during the proceedings.

5. The letter alleged that a certain entity had issued invoices without any underlying supply of goods or services and passed on fraudulent input tax credit to various recipients, including the petitioner.

6. Upon perusal of the letter, the court found that it was not apparent which entry pertained to the petitioner or the alleged invoice sent to the petitioner without any underlying supply of goods or services.

7. The petitioner’s counsel stated that due to the suspension of registration, the petitioner had not been able to carry on any business for the last six months and sought cancellation of the registration.

8. The court held that the show cause notice did not contain the requisite details and was not sustainable, thus setting it aside. The letter dated 12.06.2023 also did not provide clarity on the allegation of availing fraudulent input tax credit by the petitioner.

9. It was stated that the respondent could take further action in accordance with the law, including cancellation of registration with retrospective effect, provided a proper show cause notice and an opportunity of hearing were given to the petitioner.

10. The petitioner was given the option to apply for cancellation of registration in accordance with the law.

11. The petition was disposed of in the above terms.

Conclusion:

The Delhi High Court quashed the show cause notice for the suspension of GST registration due to lack of requisite details and clarity on the allegations. The respondent was allowed to take further action, including cancellation of registration with retrospective effect, provided proper procedures were followed. The petitioner was given the option to apply for cancellation of registration in accordance with the law.

FAQ:

Q1: What was the main issue in the case?

A1: The main issue in the case was the challenge against the show cause notice dated 05.07.2023, which had suspended the petitioner’s GST registration.

Q2: What was the court’s decision regarding the show cause notice?

A2: The court quashed the show cause notice as it lacked requisite details and clarity on the allegations.

Q3: What options were given to the petitioner after the judgment?

A3: The petitioner was given the option to apply for cancellation of registration in accordance with the law.

1. Petitioner impugns show cause notice dated 05.07.2023 whereby the registration of the petitioner has been suspended. Petitioner further seeks a direction to the respondent to cancel the registration of the petitioner from the date when the last return was filed i.e. in July, 2023.

2. Learned counsel for the petitioner submits that the show cause notice does not give any reason or detail but merely refers to letter dated 12.06.2023 of Assistant Commissioner (Okhla Division) GST, South Delhi Commissionerate. He submits that copy of the letter has also not been provided.

3. Issue notice. Notice is accepted by learned counsel appearing for the respondent. With the consent of the parties, the petition is taken up for final disposal today.

4. Learned counsel for the respondent has produced letter dated 12.06.2023 copy of which has also been handed over to learned counsel for the petitioner.

5. Perusal of letter dated 12.06.2023 shows that there is an allegation that one Neeraj Enterprises had issued invoices without any underlying supply of goods or services and passed on fraudulent input tax credit to various recipients and petitioner is alleged to be one of the such recipients.

6. From the perusal of Annexure-A annexed to the said letter, it is not apparent as to which entry pertains to the petitioner or invoice alleged to have been sent to the petitioner without any underlying supply of goods or services.

7. Learned counsel for the petitioner submits that petitioner does not intend to carry on any business in the same entity for the reason that the registration was suspended by the impugned show cause notice dated 05.07.2023 and petitioner for the last six months has not been able to carry on any business and he accordingly seeks cancellation of the registration.

8. Be that as it may, since we have held that the show cause notice does not contain the requisite details, the same is not sustainable and is liable to be quashed and even the letter dated 12.06.2023 does not give any clarity as to the allegation of availing of fraudulent input tax credit by the petitioner. Accordingly, the show cause notice is set aside.

9. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.

10. With regard to the contention of learned counsel for the petitioner for cancellation of the registration, it would be open to the petitioner to apply for cancellation of registration in accordance with law.

11. Petition is accordingly disposed of in the above terms.

SANJEEV SACHDEVA, J

RAVINDER DUDEJA, J

JANUARY 05, 2024