The Allahabad High Court, in M/s. Shyam Sundar Sita Ram Traders v. State of U.P. & Ors. [Appeal Number 991 of 2021 decided on 23.03.2023] held that a GST registration can only be cancelled in accordance of the conditions under Section 29(2) of the CGST Act. Moreover, simultaneous proceedings of being a bogus firm as well as recovery proceedings under Section 74 of CGST Act cannot be carried out against the same firm.
M/s. Shyam Sundar Sita Ram Traders (hereinafter referred to as “the Petitioner”) is a registered Proprietorship firm and on 15.12.2020, the Petitioner, changed its business address and in this regard, an amendment application was moved, which was approved by the Department on 09.02.2021.
On 03.01.2021, the department conducted a survey at the earlier place of business and found that the firm is not existing at the registered place. A Show Cause Notice (hereinafter referred to as the “SCN”) was issued to the Petitioner on 11.02.2021, alleging cancellation of GST registration as the firm was non-existent at the registered place of business.
Further the GST registration was cancelled on 31.02.2021 in absence of reply on the ground of availing Input Tax Credit (hereinafter referred to as the “ITC”) from bogus firm. The Petitioner thereafter moved an application under Section 30 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) before the Assistant Commissioner, Commercial Tax, Bareilly (hereinafter referred to as the “Respondent No.3”) seeking revocation of cancellation of the registration. The Respondent No.3 rejected the application vide order dated 17.05.2021 due to failure on the part of the Petitioner to reply to the notice dated 22.04.2021.
The Petitioner preferred an appeal before the Additional Commissioner, Commercial Tax, (hereinafter referred to as the “Respondent No.2”) which was also dismissed vide order dated 14.09.2021.
The Petitioner, has hence filed the present petition challenging the actions and orders dated 17.05.2021 and 14.09.2021 passed by the Respondent 2&3.
ISSUE BEFORE THE ALLAHABAD HIGH COURT
CONTENTIONS OF THE PARTIES
The Petitioner contended that the GST registration can only be cancelled when the conditions of Section 29(2) of the CGST Act are fulfilled. It was submitted that the non-availing ITC cannot be a ground for cancellation of GST registration. Moreover, the SCN also stated that nothing was found in the premises of the Petitioner. It was also argued that for the availment of credit, the Respondents have issued a SCN for recovery of credit wrongly availed.
It was also submitted that the proceedings on non-existence of the firm as well as the recovery proceedings under Section 74 of the CGST Act cannot go on simultaneously.
The Respondents submitted that the firm was not found at the time of survey.
DECISION AND FINDINGS
The Allahabad High Court observed the order dated 17.05.2021 and 14.09.2021 and held that the Respondents had committed an error in deciding that several firms availing wrong ITC were bogus firm. The Court further relied on Apparent Marketing private Limited v. State of UP & Ors. [Writ Tax No. 348 of 2021 decided on 05.03.2022] and held that the GST registration can only be cancelled on the grounds enumerated in Section 29(2) of the CGST Act and being a bogus firm is not a ground. Moreover, during the pendency of proceedings under Section 74 of CGST Act, the rejection of revocation is wrong exercise of power. The High Court set aside the orders dated 17.05.2021 and 14.09.2021 and gave liberty to the Respondents to conclude the proceedings under Section 74 of the CGST Act.
The Allahabad High Court has upheld that the conditions of Section 29(2) of the CGST Act are mandatory for cancellation of GST registration. Moreover, two simultaneous proceedings one for alleging a bogus firm and another for recovery under Section 74 of CGST Act cannot be initiated.
– Team AMLEGALS assisted by Ms. Aayushi Udeshi (Intern)
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