2024(02)LCX0344

Shree Ram Glass Bachauli Kuftabad Beekapur

Versus

State Of U.P.

WRIT - C No. - 1346 of 2024 decided on 16-02-2024

Neutral Citation No. - 2024:AHC-LKO:13946

Court No. - 6

Case :- WRIT - C No. - 1346 of 2024

Petitioner :- M/S Shree Ram Glass Bachauli Kuftabad Beekapur Thru.
Partner Shree Aman Jaiswal

Respondent :- State Of U.P. Thru. Secy. State Tax U.P Govt. Lko. And 2
Others

Counsel for Petitioner :- Abul Fazal Jaffrey

Counsel for Respondent :- C.S.C.

Hon'ble Alok Mathur,J.

1. Heard Sri Rishi Raj Kapoor, learned counsel for the petitioner and the Standing counsel on behalf of the respondents.

2. By means of the present writ petition the petitioner has challenged the order of cancellation of registration under U.P. Goods and Services Tax Act, 2017 vide order dated 1.6.2023 as well as rejection of the application for revocation vide order dated 2.9.2023 and also rejection of his appeal against both the aforesaid orders by means of order dated 30.11.2023.

3. It has been submitted by learned counsel for the petitioner that the petitioner is a partner ship firm duly engaged in business of trade of glass and glass sheets and has been registered under U.P. Goods and Services Tax Act, 2017(hereinafter referred to as the Act of 2017) having its GST registration No.09AENFS8166C1ZK. It is further submitted that it is transacting business and filing its returns. It is further stated that returns pertaining to financial years 2021-22 and 2022 -23 have been filed.

4. The grievance of the petitioner in the present case has occurred on account of the order dated 1.6.2023 where the registration of the petitioner under the Act of 2017 has been cancelled by Assistant Commissioner, State Tax, Sector 5, Ayodhya. It was found that the petitioner does not conduct any business at the declared place of business and that he does not submit any response to the show cause notice issue to him and accordingly his registration was cancelled.

5. Against the said order of cancellation the petitioner had moved an application for revocation of the said order. Along with his application he had moved another application for a fresh inspection f business premises. As per the application submitted by the petitioner the premises were inspected on 21.7.2023 where no goods were found on the said place of business where the landlord was present and whose signatures and other identifications papers were taken by the inspecting team. The landlord has submitted lease agreement dated 23.6.2011 entered into between the petitioner and the landlord.

6. While rejecting the application for revocation it was stated that no goods were found in the business premises of the petitioner and also that signature of the landlord did not match from two rent agreements entered into between the petitioner and the landlord.

7. Aggrieved of the aforesaid two orders the petitioner had filed an appeal before the appellate authority under Section 107 (11) of CGST and SGST Act. Before the appellate authority it was submitted that the findings returned by both the authorities were perverse and arbitrary in as much as the petitioner has duly filed his returns i.e. GSTR 3B and GSTR-1 of financial year 2021- 22 where a sale of Rs.47,01,234/- was recorded as well as return for financial year 2022-23 where sale of Rs.1,41,79,965/- was recorded. It was stated that the returns were duly accepted by the authorities concerned and there was no material to demonstrate that the firm was bogus or that no business was conducted by the petitioner. The appellate authority also went into the entire facts but it laid more emphasis on the fact that business premises where the petitioner is alleged to have conducted his business no material or business activity was found and it was also found that the signatures of the landlord did not tally and it was concluded that it was a sham registration and the appeal was dismissed.

8. Learned counsel for the petitioner submits that the orders on the face of its is illegal and arbitrary. He submits that the petitioner has submitted fresh evidence to disclose that business activities was undertaken by him from the place of business which has clearly demonstrated by the return for the financial years 2021-22 and 2022-23. He further submits that cancellation of registration can taken place where only condition provided under Section 29 sub clause 2 of the Act of 2017 are fulfilled. For the sake of convenience sub clause 2 of the Act of 2017 is quoted hereasunder:-

"(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,-

(a) a registered person has contravened such provisions of the Act or the rules made there under as may be prescribed; or

(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d) any person who has taken voluntary registration under subsection (3) of section 25has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

[PROVIDED FURTHER, that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.]"

9. He submits that none of the conditions prescribed under Section 29 (2) of the Act of 2017 are existing in the present case and consequently the impugned order is without jurisdiction, illegal and arbitrary and deserves to be interfered by this court in exercise of its powers under Article 226/227 of the Constitution.

10. Learned Standing counsel, on the other hand, has submitted that the orders have been passed by the authorities totally in accordance with law and submits that there was a drive to curb bogus firms which have been created only to claim the benefit of Input Tax Credit . He submits that the petitioner does not conduct any business activity that the place of business provided under the registration nor did he respond to the notice issued issued by the concerned authority consequently his rejection was cancelled.

11. I have heard learned counsel for the parties and perused the records.

12. It is noticed that registration of the petitioner was cancelled pursuant to the show cause notice issued to him where the petitioner did not respond to the same and it was found that the petitioner did not conduct any business activity from the registered place of business. The petitioner had moved an application for revocation of the cancellation of the registration and in pursuance of the said application a spot inspection was also conducted where it was found that no stock was found on the premises and even the signatures of the landlord did not tally in the two rent agreements which were examined by thee authorities.

13. Considering the provisions contained under Section 29 (2) along with the facts of the present case it is noticed that there is no denial of the fact that the petitioner has, in fact, conducted business from the said address in as much as returns have been filed for the financial years 2021-22 and 2022-23 and this fact has not been denied by any of the authorities. Both the authorities should have taken into consideration the returns filed by the petitioner who had disclosed substantial business activities conducted by him for two financial years.

14. Cancellation of registration has serious consequences. It takes away the fundamental right of a citizen etc. to engage in a lawful business activity. In the present case, undisputedly, the registration claimed by the assessee had been granted by the respondent authority. Therefore, a presumption does exist as to such registration having been granted upon due verification of necessary facts. If the respondents propose to cancel the registration thus granted, a heavy burden lay on the respondent authority to see that statutory provisions contained under Section 29 (2) of the Act of 2017 are fulfilled and any one of the five conditions are placed to the assessee for cancellation. There is no allegation that the petitioner had contravened any provisions of this Act or rules made therein and admittedly provision of contained from (b) to (e) are not applicable to the facts of the present case

15. Examining the entire facts of the case this Court is of the considered opinion that the findings returned by the adjudicating authority as well as the appellate authority are perverse in as much as the petitioner submitted that he had filed his returns for the financial years 2021-22 and 2022-23. No further examination of the same was undertaken. Merely because at the place of business no stock was found it was concluded that the petitioner did not conduct any business activity. There is no law which mandates a businessman to always retain stock at the place of business. To come to such a conclusion the authorities should have undertaken further exercise to indicate that the returns filed by the assessee themselves were fraudulently filed only to claim Input Tax Credit. The authorities have failed to discharge the duties and merely because the place of business did not contain any stock the registration of the petitioner was cancelled.

16. It is in aforesaid circumstances that this Court is of the considered opinion that both the impugned orders are illegal and arbitrary and accordingly set aside. The writ petition succeeds and is allowed.

17. It is open for the authorities to issue a fresh notice on any specific ground mentioned under Section 29 (2) of the GST Act, which proceedings, if any initiated, may be decided on its own merits without being prejudiced by any of the observation made in this order.

(Alok Mathur, J.)

Order Date :- 16.2.2024