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GST: Karnataka High Court Quashed Order of Cancellation of GST Registration Where Sufficient Time Was Not Granted to Submit Reply (2023-ProIndiaClub HC 5)

Recently in case of Ummer Farooq Vs Superintendent of Central Tax [WP No. 4985 of 2023 dated 30-03-2023], hon’ble high court of Karnataka has quashed the order of cancellation of GST registration and restore the enquiry proceedings because sufficient time was not provided to the petitioner to submit reply.

The GST Department (i.e. first respondent/respondent) has issued notice dated 26.10.2022 informing the petitioner that the petitioner has availed input tax credit for different transactions with entities as mentioned in such notice but the registration of such entities have been either cancelled or suspended and hence, the petitioner must furnish documents in support of the input tax credit. The first respondent has afforded five days to file such documents.

On 01.11.2022, the respondent has issued Show Cause Notice for cancellation of the petitioner’s GST registration The petitioner, on receipt of such Show Cause Notice, has appeared before the first respondent and sought for time.

Thereafter, the respondent on 08.12.2022 has issued the impugned order cancelling the petitioner’s GST registration on the ground that the petitioner has not reversed the disputed input tax credit with interest and penalty.

The petitioner thereafter has filed an application with the first respondent for revocation of the cancellation contending that all of his transactions with the suppliers for the value of more than Rs.10,000/- is made only through banking transactions. If there is any default by a supplier who has furnished GST numbers, the petitioner cannot be made liable and that would be contrary to the provisions of Section 16 of the GST Act, 2017 which contemplates only four conditions to claim input tax credit. This application is pending consideration.

Sri. Shreehari Kutsa, Counsel of petitioner submitted that with the issuance of the notice dated 26.10.2022, the petitioner is allowed only four days time to produce the documents and therefore, with the service of Show Cause Notice dated 01.11.2022, the petitioner has appeared before the respondent on 09.11.2022 and has sought for time.

The first respondent has issued the impugned order before the petitioner could furnish his bank documents and other records to demonstrate that all his transactions are supported by proper invoices, e-way bills and bank records. As such, the petitioner is obviously denied due opportunity to show cause against the cancellation of the GST registration.

After considering the above facts, Court was of the view that the petition must be preferred in part quashing the impugned order of cancellation of GST registration restoring the proceedings for reconsideration by the first respondent. This Court must also observe that all contentions are left open to be considered by the first respondent strictly in accordance with law.

Finally, Court allowed the petition in part quashing the impugned order of cancellation of GST registration and restoring the proceedings for reconsideration by the first respondent.

Download Order in Original Below:

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