Delhi High Court Restores GST Registration Cancelled Without Due Process

Case Name:

W.P.(C) 14494/2023 - ATT SYS INDIA PVT LTD ESTEX TELE PRIVATE LIMITED CONSORTIUM vs. THE COMMISSIONER GOODS AND SERVICES TAX DELHI

Key Takeaways:

1. The petitioner’s GST registration was cancelled without any Show Cause Notice (SCN) or opportunity to be heard.
2. The petitioner, an Association of Persons, had obtained GST registration for a contract awarded by IHMCL.
3. The petitioner discovered the cancellation of their GST registration when they were required to discharge their GST liabilities after receiving funds from an arbitral award.
4. The cancellation order did not provide any reason for the cancellation and violated the principles of natural justice.
5. The High Court directed the restoration of the petitioner’s GST registration and ordered compliance with statutory provisions for filing returns.

Case Synopsis:

This is a judgment from the High Court of Delhi, dated November 20, 2023, in the case of W.P.(C) 14494/2023. The petitioner in this case is ATT SYS INDIA PVT LTD ESTEX TELE PRIVATE LIMITED CONSORTIUM, and the respondent is THE COMMISSIONER GOODS AND SERVICES TAX DELHI.

The petitioner had filed a petition seeking directions to revoke the order cancelling their Goods and Services Tax (GST) registration. The petitioner claimed that their GST registration was cancelled without any Show Cause Notice (SCN) or opportunity to be heard. The petitioner is an Association of Persons constituted by ATT Sys India Pvt. Ltd. and Estex Tele Private Limited, and they were awarded a contract by the Indian Highway Management Company Limited (IHMCL) for conducting traffic surveys on National Highways in Zone-4.

According to the petitioner, their GST registration was cancelled after they received funds in terms of an arbitral award, and they were required to discharge their GST liabilities. However, upon examining the portal, they discovered that their GST registration was cancelled, and they were unable to file their returns. The petitioner claimed that they had paid GST in excess of ₹14.90 lakhs, which was lying deposited with the respondent authorities.

The respondent submitted that a SCN was issued to the petitioner on November 27, 2020, proposing to cancel their GST registration for the reason of filing zero returns for the last six months. The petitioner’s GST registration was also suspended with effect from November 27, 2020. The respondent further stated that the SCN was served through the portal, and an order was passed on December 26, 2020, cancelling the petitioner’s GST registration. However, the order did not mention any reason for cancelling the registration.

The court noted that even if the respondent’s contention of issuing a SCN was accepted, the SCN did not mention any time or date for a personal hearing, thereby denying the petitioner an opportunity to contest the SCN. The court held that the impugned order cancelling the petitioner’s registration was void as it was passed in violation of the principles of natural justice and lacked any reason for cancellation. Therefore, the court directed the restoration of the petitioner’s GST registration and ordered the petitioner to comply with the statutory provisions by filing returns in accordance with the law.

It is important to note that this is a specific case judgment and may not be applicable to other cases.

FAQ:

Q1: Why was the petitioner’s GST registration cancelled?

A1: The respondent authorities claimed that the petitioner had filed zero returns for the last six months, which led to the cancellation of their GST registration.

Q2: Did the petitioner receive a Show Cause Notice (SCN) before the cancellation?

A2: The petitioner claimed that they did not receive any SCN or opportunity to be heard before the cancellation of their GST registration.

Q3: What did the High Court decide in this case?

A3: The High Court held that the cancellation of the petitioner’s GST registration was void as it lacked reason and violated the principles of natural justice. The court directed the restoration of the registration and ordered compliance with statutory provisions for filing returns.

Key Takeaways in list form:

1. GST registration of the petitioner was cancelled without proper notice or opportunity to be heard.
2. The cancellation order did not provide any reason for the cancellation.
3. The cancellation violated the principles of natural justice.
4. The petitioner had obtained GST registration for a contract awarded by IHMCL.
5. The High Court directed the restoration of the petitioner’s GST registration and ordered compliance with statutory provisions for filing returns.

M APPL. 57521/2023 (for exemption)

1. Exemptions allowed, subject to all just exceptions.

2. The application stands disposed of.

CM APPL. 59782/2023 (for placing amended memo of parties on record)

3. The petitioner has filed the amended memo of parties, the same is taken on record.

4. In view of the above, Mr. R. Ramachandran, learned Counsel who appears for the Central authorities, is not required to appear as the petitioner’s grievance is confined to the action of the State authorities.

W.P.(C) 14494/2023 & CM APPL. 57520/2023 (for interim relief)

5. The petitioner has filed the aforesaid petition, praying that the directions be issued for revoking the order cancelling of the petitioner’s GST registration (GSTIN- 07AAEAA1359D1Z6).

6. It is the petitioner’s case that GST registration was cancelled without issuance of any Show Cause Notice (hereafter ‘SCN’) or without affording the petitioner, any opportunity to be heard.

7. The petitioner is an Association of Persons, constituted by ATT Sys India Pvt. Ltd. and Estex Tele Private Limited.

8. The petitioner was constituted in July, 2015 to execute a contract dated 28.10.2014, awarded by the Indian Highway Management Company Limited (hereafter ‘IHMCL’) for conducting traffic surveys on National Highways in Zone-4 (in the States of Uttar Pradesh, Bihar and Jharkhand).

9. It is stated that pursuant to the enactment of the Acts relating to levy of Goods and Services Tax Act in the year 2017, the petitioner had obtained registration- Goods and Service Tax Identification Number. The petitioner claims that the contract awarded by IHMCL was terminated, which led to the disputes. The said disputes were referred to arbitration, which has culminated in an award in favour of the petitioner.

10. In terms of the arbitral award dated 24.05.2023, IHMCL was directed to make payments of ₹5,49,97,760/- to the petitioner. The petitioner claims that it has not engaged in any other business apart from executing the contract in question and, therefore, had been filing Nil returns.

11. Since the petitioner has received funds in terms of the arbitral award, the petitioner is now required to discharge the GST liabilities in respect of the said amount. The petitioner states that on examining the portal, it was discovered that the petitioner’s GST registration was cancelled and, therefore, the petitioner has been unable to file its returns. It is claimed that the petitioner has paid GST in excess of ₹14.90 lakhs, which is lying deposited with the respondent authorities.

12. Mr. Aggarwal, learned Counsel for the respondent, submits that the SCN was issued to the petitioner on 27.11.2020, proposing to cancel the petitioner’s GST registration for the following reason:

“Filing zero return for last six months.”

13. The petitioner’s GST registration was also suspended with effect from 27.11.2020.

14. Mr. Aggarwal also states that the SCN was served through the portal. Pursuant to the said SCN, an order dated 26.12.2020 was passed, cancelling the petitioner’s GST registration. A copy of the said order is also handed over to this Court, the same indicates that the said order has been passed solely for the reason that no reply has been received to the SCN. The space for filling in the reasons for cancelling the petitioner’s GSTIN has been left blank. Thus, the SCN does not reflect any reason for cancelling the petitioner’s GST registration.

15. Mr. Aggarwal also fairly states that filing Nil returns may not be a ground for cancelling the GST registration. He submits that the petitioner may be permitted to file an application for revocation of the order cancelling the petitioner’s GST registration.

16. As noted above, according to the petitioner, it did not receive the SCN. However, even if the respondent’s contention is accepted that a SCN, a copy of which is handed over, was, issued to the petitioner, the same would be of little assistance to the respondent because the SCN does not mention any time or date for personal hearing. Thus, the petitioner was not afforded a hearing to contest the SCN. The impugned order cancelling the petitioner’s registration is void as it has been passed in violation of the principles of natural justice. As noted above, the impugned order is not informed by reason. It does not set out any ground for cancelling the petitioner’s GST registration. Thus, said order cannot be sustained.

17. In view of the above, we consider it apposite to direct that the petitioner’s GST registration be restored forthwith. The petitioner shall also comply with the statutory provisions by filing the returns in accordance with law.

18. It is clarified that this order will not preclude the GST authorities from taking any further steps in accordance with law if the petitioner has fallen foul of of any statutory compliance.

19. The GSTIN authorities shall ensure that the order is complied with without any delay.

20. The petition is disposed of in the aforesaid terms.

VIBHU BAKHRU, J

AMIT MAHAJAN, J

NOVEMBER 20, 2023