Orissa HC revokes GST Registration Cancellation on failure of Dept. to prove wrongful availment of ITC on fake invoices

In M/S. Bright Star Plastic Industries v. Additional Commissioner of Sales Tax [W.P. (C) No. 15265 of 2021 dated October 04, 2021], M/S. Bright Star Plastic Industries ("the Petitioner") has filed a Petition against impugned  Order dated April 05, 2021 passed by Additional Commissioner of CT & GST ("the Respondent") wherein the Respondent rejected the Petitioner's appeal questioning the Order passed by the Learned Proper Officer ("LPO") rejecting the Petitioner's application for revocation of cancellation of his GST Registration on January 07, 2021 under Section 30 (2) of the Odisha Goods and Services Tax Act, 2017 ("the OGST Act").

The Petitioner was involved in the business of manufacturing and trade of Poly Vinyl Chloride ("PVC") pipes, iron scraps, etc. On August 14, 2020, the CT & GST Officer, Bhubaneswar ("the Respondent No.2") issued a Show-Cause Notice ("SCN") in Form GST REG-17 under Rule 22(1) of the OGST Rules, 2017 for cancellation of the Petitioner's registration on the ground that:

"Registration has been obtained by means of fraud, willful misstatement or suppression of facts".

In the case, the Petitioner contended that under Section 16 of the OGST Act and Rule 21 of the OGST Rules 2017, there is no provision that enables the cancellation of the registration of the purchasing dealer for any fraud committed by the selling dealer. Secondly, the Petitioner argued that the cancellation registration of the selling dealer M/s. Pawansut Enterprises took place only on October 01, 2019, long after the dates of the purchases made by the Petitioner from the said dealer. Therefore, it was submitted that on the date of purchases taking place, there was no way that the Petitioner would have known that at some future point in time, the registration of the selling dealer was going to be cancelled.

As opposed to the contentions made by the Petitioner, the Respondent argued that a field visit was undertaken to the address shown for the selling dealer, the premises were found to be occupied by some other person and not by the selling dealer. From the said visits which were undertaken on July 01, 2019, a conclusion was drawn that the transactions entered into by the Petitioner with the selling dealer in April and August 2018 were fake transactions.

After taking perusal of all the facts and evidences, the Honorable Orissa High Court ("the Orissa HC") observed that the Respondent has failed to show that the Petitioner as a purchasing dealer deliberately availed the ITC in respect of the transactions with an entity knowing that such an entity was not in existence and on the basis of this observation, the Court revoked the GST Registration Cancellation.