GST Registration Cancellation: Superintendent Of Central Tax To Take Independent Decision Without Influenced By Direction Of DGGI: Kerala High Court

The Kerala High Court has held that the Superintendent of Central Tax should take an independent decision without being influenced by the direction of the DGGI, Kochi Zonal Unit.

The bench of Justice Dinesh Kumar Singh has observed that the DGGI, Kochi Zonal Unit, has already taken the decision to cancel the GST registration of the petitioner. The competent authority was only required to form the formalities, and the authority concerned or the competent authority could not have taken an independent decision. Therefore, the impugned order is set aside. However, the order is not revived for a period of one month.

The petitioner or assessee has issued invoices or bills to other dealers without supplying goods or providing any services in violation of the GST Act and Rules. The violation of raising Invoices and Bills have been used by the purchasing dealers for the declaration of the input tax credit or refund of tax

Some intelligence input was received for fake invoicing. The DGGI, Kochi Zonal Unit, in view of the intelligence report, directed the Range Officer, Ottappalam Range, to cancel the petitioner’s GST registration under Section 29(2)(a) read with Rule 21(e) of the CGST Act/Rules, 2017.

The petitioner challenged the cancellation of their GST registration by the DGGI, Kochi Zonal Unit. The primary reason for the cancellation was the issuance of invoices/bills to other dealers without supplying goods or providing services, which was deemed a violation of the GST Act and Rules. Intelligence inputs also indicated potential involvement in fake invoicing.

The petitioner received a show cause notice which was followed by a reply. The notice did not specify where the petitioner should appear for a personal hearing. The show cause notice was cancelled. Another show cause notice was issued, but the petitioner did not respond.

The petitioner contended that when the DGGI Cochin Unit had already taken a decision and directed for cancellation of the GST registration of the petitioner, the competent authority could not have taken a decision contrary to the direction issued by the higher authority. The direction for cancellation of the GST registration of the petitioner was without following the due process of the law prescribed under the statutes and rules thereunder. It is wholly without jurisdiction and against the provisions of the law, and, therefore, the order is liable to be set aside.

The department contended that a large cartel is operating to avail fake input tax credits. There has been intelligence input and investigation in respect of the cartel, and after conducting the investigation, it was confirmed that the cartel is operating to avail itself of the fake input tax credit, and, therefore, DGGI, Kochi Zonal Unit, has been directed to cancel the GST registration certificate of the petitioner. The issuance of show cause notice and opportunity of hearing to the petitioner was granted. However the petitioner did not make use of the opportunity of hearing and did not produce any documents, and therefore, the order has been passed.

The court directed the petitioner to appear before the Superintendent of Central Tax and Central Excise, Ottapalam, with relevant records in his possession to dispute the allegation contained in the show cause notice. The adverse materials collected against the petitioner must be given to him for advertising the same. After taking the evidence from the petitioner and providing an opportunity of a hearing to him, a fresh order may be passed in accordance with the law within a period of three weeks from September 18, 2023. If the show cause is cancelled, the petitioner would be entitled to the restoration of the GST registration certificate. However, if the authority takes a decision to cancel the GST registration of the petitioner, he may take recourse to appropriate proceedings as available under law.

Counsel For Petitioner: Aswin Gopakumar

Counsel For Respondent: P.T. Dinesh

Citation: 2023 LiveLaw (Ker) 530

Case Title: Muhammad Salmanul Faris K Versus The Superintendent

Case No.: WP(C) NO. 25716 OF 2023

Click Here To Read The Order