Mere non-reply to SCN cannot be ground for cancellation of GST Registration

The Hon'ble Allahabad High Court in Acambis Helpline Management (P.) Ltd. v. Union of India [Writ Tax No. 185 of 2022 dated December 15, 2022] has set aside the order cancelling the Goods and Services Tax ("GST") Registration of the assessee, passed on the ground that the assessee had failed to reply to the Show Cause Notice ("SCN"). Held that, even if the assessee has failed to furnish a reply to a SCN, it is necessary for the Revenue Department to consider the facts of the case and accordingly conclude that the facts necessitated cancellation of the GST Registration. Directed the assessee to submit a reply to the SCN within 3 weeks. Further, directed the Revenue Department to decide the matter afresh in accordance with the law. 

Facts

Acambis Helpline Management ("the Petitioner") is involved the business of man power supply. The Revenue Department ("the Respondent") served the Petitioner with a SCN dated December 2, 2021 ("the Impugned SCN") wherein it was stated that the Petitioner had not furnished its return for a continuous period of six months under Section 39 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") and was called upon to file a reply within 30 days. However, the Petitioner failed to furnish a reply. 

Consequently, an Order dated January 3, 2022 ("the Impugned Order") was passed cancelling the GST Registration of the Petitioner under Section 29 of the CGST Act. The Petitioner had preferred an appeal against the Impugned Order, which was dismissed on the ground of limitation.

Being aggrieved, this petition has been filed.

The Petitioner contended that it was entitled to seek judicial review of the Impugned Order on the ground that the same was a non-speaking order.

Issue

Whether the Impugned Order cancelling the GST Registration of the Petitioner is sustainable?

Held

The Hon'ble Allahabad High Court in Writ Tax no. 185 of 2022 held as under: 

• Observed that, the only reason mentioned in the impugned order for cancelling the GST Registration was that the Petitioner did not furnish a reply to the SCN.
• Held that, even if the Petitioner failed to furnish a reply to the Impugned SCN, it was necessary for the Respondent to consider the facts of the case and accordingly conclude that the facts necessitated cancellation of the GST Registration of the Petitioner.
• Set aside the Impugned Order.
• Directed the Petitioner to submit its reply to the Impugned SCN within 3 weeks.
• Permitted the Respondent to pass fresh order in accordance with the law.

Relevant Provisions

Section 29 of the CGST Act

"Cancellation or suspension of registration.

29. (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,––

(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

(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 thereunder as may be prescribed; or
(b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or
(d) any person who has taken voluntary registration under sub-section (3) of section 25 has 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.

(3) The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.

(4) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.

(5) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed:

Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.

(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed."