F R Trade Links vs The State Tax Officer
2021 Latest Caselaw 16421 Ker

                 IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                 PRESENT
                   THE HONOURABLE MR. JUSTICE A.M.BADAR
         THURSDAY, THE 5TH DAY OF AUGUST 2021 / 14TH SRAVANA, 1943
                         WP(C) NO. 28917 OF 2020
PETITIONER/S:
           F R TRADE LINKS,6/580 E, THEKKEMURANJOOR BUILDING,
           ERATTUPETTA-VAGAMON ROAD, ERATTUPETTA, KOTTAYAM-686121,
           REPRESENTED BY ITS PROPRIETOR SRI. MOHAMMED RIZWAN
           RASHEED.

              BY ADVS.
              AJI V.DEV
              SRI.ALAN PRIYADARSHI DEV
              SHRI.KIRAN RAMACHANDRAN NAIR



RESPONDENT/S:
     1     THE STATE TAX OFFICER,
           STATE GOODS AND SERVICES TAX DEPARTMENT, PALA - 686565.

     2        THE ASSISTANT STATE TAX OFFICER,SQUAD 2, INTELLIGENCE
              WING, STATE GOODS AND SERVICES TAX DEPARTMENT, 2ND FLOOR,
              MINI CIVIL STATION, PALA-686575.

     3        GOODS AND SERVICES TAX NETWORK,
              REPRESENTED BY ITS CHAIRMAN, EAST WING, 4TH FLOOR, WORK
              MAR-1, AEROCITY, NEW DELHI-110037.

     4        THE COMMISSIONER OF STATE TAXES,TAX TOWER, KILLIPALAM,
              KARAMANA P.O., THIRUVANANTHAPURAM-695002.

              BY ADV GOVERNMENT PLEADER



              SMT.M.M.JASMINE , GP,

              SRI.P.R.SREEJITH,SC,GSTN


     THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
05.08.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 WP(C) NO. 28917 OF 2020                    2




                                  JUDGMENT

Heard both sides.

2. The petitioner, a registered person, by this petition, is

challenging the orders at Exts.P8 and P12 cancelling his certificate of

registration under the CGST/SGST Act and rejection of his application

for revocation of cancellation of registration certificate.

3. Learned counsel appearing for the petitioner drew my

attention to the order of cancelllation of registration and submitted

that respondents have invoked provisions under Sub Section (2) of

Section 29 of the CGST/SGST Act, 2017 for cancellation of

registration of the petitioner. However, the reasons stated in the

impugned order at Ext.P8 are not in consonance with the powers

conferred by the respondents for cancellation of registration. It is

further submitted by the learned counsel appearing for the petitioner

that the order for rejection of application for revocation of

cancellation also suffers from non-application of mind and it is an

unreasoned order, without mentioning any reason for rejection of

application for revocation of cancellation. Learned counsel appearing

for the petitioner submitted that the petitioner has honestly given all

necessary particulars in the application for registration of (Ext.P17)

and no case is made out by the respondents that the registration has

been obtained by the petitioner by means of fraud, willful

misstatement or suppression of facts.

4. Learned counsel appearing for the petitioner, by placing

his reliance on judgment of this Court in the matter of P.Y. Mustaffa,

Kanakonam Traders, Erattupetta V. Additional Sales Tax Officer, Pala

& Another [(2002) 10 KTR 192] submitted that the matter of

registration is merely regulatory in nature and no overbearing

importance can be given to minor lapses in such matter.

5. Learned Government Pleader opposed the petition by

placing reliance on the counter affidavit. She submitted that several

inspections were conducted by the respondents at the principal place

of business of the petitioner. It is submitted that during inspection, it

was found that no business was conducted at the place of principal

business centre. The building was not having any building number or

shutter and no books of accounts were placed at that place of

principal business. The door was fully opened and some water tanks

were kept. The building was found to be having no change in

structure during second inspection. In second inspection, it was

found that some stock was kept at the new premises near the house

of the petitioner, but that place was not added in the GST registration

and therefore, it was suspected to be a bogus. The business in the

name and style of 'F.R Trade Links' was not found functioning in the

given address and therefore, the impugned action was taken.

Learned Government Pleader tried to place reliance on some other

aspects which are unfortunately not mentioned as a reason for

cancellation of registration of the petitioner and therefore, it is not

necessary to elaborate the same while incorporating the argument of

the learned Government Pleader.

6. I have considered the submissions so advanced and also

perused the materials placed before me.

7. The impugned order of cancellation of registration of the

petitioner is dated 02.11.2020 and is at Ext.P8. Perusal of that order

shows that registration is cancelled by invoking provision of Sub

Section (2) of Section 29 of the CGST Act, 2017. It is worthwhile to

reproduce provisions of Sub Section (2) of Section 29 of the CGST

Act, which reads thus:-

''29. Cancellation or suspension of registration: (1) xxxxxxxxxxx

(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 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 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, willful 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.''

It is seen from the foregoing provision of law that the proper officer

can cancel registration of a person for the reasons stated in Sub

Section (2) of Section 29 of the CGST Act. It is not the case of the

respondents that the petitioner had contravened any of the

provisions of the Act or Rules made thereunder, inasmuch as, no

such allegation is levelled against the petitioner either in the show

case notice (Ext.P5) nor such accusation is made against him in the

impugned order at Ext.P8. My attention is not drawn to contravention

of any provision of the Act or Rules framed thereunder by the

learned Government Pleader. Similarly, there are no allegations

either in the show cause notice or in the impugned order that the

petitioner has failed to furnish returns for three consecutive tax

periods or that he failed to file returns for a continuous period of six

months. It is not averred either in the show cause notice or in the

impugned order at Ext.P8 that the petitioner has taken voluntary

registration under Sub Section (3) of Section 25, but has not

commenced the business within six months from the date of such

registration. Now the only provision which remains and empowers

the respondent to cancel the registration is indulgence in fraud,

willful misstatement or suppression of facts. Unfortunately, this is

also not the case sought to be made out by the proper officer in the

show cause notice at Ext.P5 or the impugned order at Ext.P8.

8. For better understanding of the matter, let us put on

record the relevant portion of the show cause notice making out and

conveying the case of the department to the petitioner for soliciting

his reply. The relevant portion of the show cause notice (Ext.P5)

reads thus:-

''Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:

1. As per the intelligence squad report your business place is situated in the first floor of the three storied building which is partially completed with structure only and no building number affixed by the local authority.

You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.''

It is thus clear that the allegation levelled against the petitioner by

the respondent department is to the effect that business place is

situated in a building which is partially completed with structure only

and no building number is affixed by the local authority.

9. Now let us put on record the reason mentioned in the order

for cancellation of registration dated 29.09.2020 (Ext.P8), which

reads thus:-

''1. As per the new registration case verification report submitted by the inspector of this office dated 14/10/2020 and also the report of ASTO, Squad2, Intelligence wing, Kottayam at Pala dated 11.08.2020, it is observed that F R TRADE LINKS, 6/580-E, THEKKEMURANJOOR BUILDING, ERATTUPETTA - VAGAMON ROAD, ERATTUPETTA, Kottayam, Kerala, 686 121 with GSTIN 32CMEPR0466B1ZG is not functioning in the address given in the registration application at the time of registration. They also reported that, the business place is situated in the first floor of the three storied building which is partially

completed with structures only. Said business place is an open space in pillars, having no partition walls or shutter. No building number is seen affixed by the local authority and no stock in the business premises. There is only a banner with phone number & GSTIN in the wall of three storied building. In the circumstances your contention against the SCN issued on 29/09/2020 is not acceptable. Hence the registration is canceled U/s.29(2) of the CGST/SGST Act 2017.''

10. It is thus clear that in consonance with the allegation

levelled in the show cause notice, the impugned order is passed for

the reason that the business place is situated in a building which is

partially completed with structures only and no building number is

affixed by the local authority. Even otherwise, the respondent

department cannot go beyond the show cause notice issued by it to

the petitioner, requiring the petitioner to defend the case against

him as conveyed to him in the show cause notice. Thus, this Court

will have to examine whether the reasons stated in the show cause

notice, which is reproduced in the foregoing paragraph, can be

construed as reason for cancellation of registration as per provisions

of Sub Section (2) of Section 29 of the CGST Act, 2017. The answer

to this question is found to be in negative, because Sub section (2) of

Section 29 does not envisage the contingency of situation of place of

business in a partially completed building having no building number

affixed on it by the local authority. Such is not the reason as

contemplated by Sub section (2) of Section 29, authorising the

proper person to cancel the registration of a person in exercise of the

powers conferred by the relevant provision of the statute.

Consequently, the impugned order at Ext.P8 cannot stand in the

scrutiny of law. Consequently, the order of rejection of application

for revocation of cancellation is also illegal and cannot stand in the

scrutiny of law.

11. At this juncture, it is apposite to take note of Rule 25 of

the CGST/SGST Rules. According to the provision of this Rule, where

the proper officer is satisfied that the physical verification of the place

of business of a person is required due to failure of Aadhaar

authentication or due to not opting for Aadhaar authentication before

grant of registration, or due to any other reason after the grant of

registration, the proper officer may get verification of the place of

business, in the presence of the said person, done. Thereafter, the

verification report along with the other documents, including

photographs, are required to be uploaded in FORM GST REG 30 on

the common portal within a period of fifteen working days following

the date of such verification.

12. In the case in hand, the State Tax Officer, Pala is the proper

officer for assessment and he is a competent officer to invoke

provisions of Rule 25. The State Tax Officer, Pala is also the

registering authority of the petitioner. This officer has issued a notice

to cancel the registration of the petitioner in FORM GST REG 17,

based on the report of the intelligence officer. It is clear that the

State Tax Officer, Pala has himself did not conduct any enquiry as

contemplated in Rule 25. He proceeded further to cancel

registration, despite the fact that the petitioner was aggrieved by the

report of the intelligence officer as seen from the reply tendered by

the petitioner. The proper officer, as such, ought not to have

proceeded ahead with cancellation of the registration on the basis of

report of the intelligence officer. The proper officer ought to have

independently assessed the situation, particularly, when the

petitioner had produced the receipt of the building tax from the local

authority (Ext.P3) to prove the authenticity of his stand. This seems

to have been not done by the proper officer. Without considering this

document at Ext.P3, the registering authority had cancelled the

registration. The application for revocation of cancellation of

registration is also rejected by the respondent without proper enquiry

in the matter.

In the result, the writ petition is allowed. The impugned orders

at Exts.P8 and P12 are quashed and set aside. Consequently, the

respondents are directed to restore the registration of the petitioner.

Sd/-

A.M.BADAR JUDGE ajt

APPENDIX OF WP(C) 28917/2020

PETITIONER EXHIBITS

EXHIBIT P1 A TRUE COPY OF THE GST REGISTRATION CERTIFICATE ISSUED TO THE PETITIONER DATED 08/07/2020.

EXHIBIT P2             A TRUE COPY OF THE LEASE DEED DATED
                       16/06/2020.

EXHIBIT P3             A TRUE COPY OF THE PROPERTY TAX RECEIPT DATED
                       16/06/2020.

EXHIBIT P4             A TRUE COPY OF THE TRADE LICENSE GRANTED TO

THE PETITIONER BY THE ERATTUPETTA MUNICIPALITY DATED 01/07/2020.

EXHIBIT P5 A TRUE COPY OF THE SHOW CAUSE NOTICE ISSUED BY THE 1ST RESPONDENT DATED 29/09/2020.

EXHIBIT P6 A TRUE COPY OF THE REPLY DATED 03/10/2020.

EXHIBIT P7             A TRUE COPY OF THE LEASE DEED DATED
                       24/11/2020.

EXHIBIT P8             A TRUE COPY OF THE ORDER FOR CANCELLATION OF
                       REGISTRATION PASSED BY THE 1ST RESPONDENT
                       DATED 02/11/2020.

EXHIBIT P9             A TRUE COPY F THE FORM GST REG-21 DATED
                       04/11/2020.

EXHIBIT P10            A TRUE COPY OF THE SHOW CAUSE NOTICE ISSUED BY
                       THE 1ST RESPONDENT IN FORM GST REG-23 DATED
                       03/12/2020.

EXHIBIT P11            A TRUE COPY OF THE REPLY FILED BY THE

PETITIONER AGAINST EXT.P10 SHOW CAUSE NOTICE

DATED 04/12/2020.

EXHIBIT P12 A TRUE COPY OF THE ORDER OF REJECTION OF APPLICATION FOR REVOCATION OF CANCELLATION OF REGISTRATION PASSED BY THE 1ST RESPONDENT DATED 14/12/2020.

EXHIBIT P13 A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE ORIGINAL BUSIENSS PLACE IN ERATTUPETTA VILLAGE ON 23.11.2020

EXHIBIT P13(a) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE ORIGINAL BUSIENSS PLACE IN ERATTUPETTA VILLAGE ON 23.11.2020 ALONG WITH ENGLISH TRANSLATION

EXHIBIT P14 A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(a) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(b) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(c) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(d) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(e) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE

EXHIBIT P14(f) A TRUE COPY OF PHOTOGRAPH TAKEN FROM THE NEW BUSINESS PLACE IN THEEKOY VILLAGE ALONG WITH ENGLISH TRANSLATION.

EXHIBIT P15 A TRUE COPY OF THE TRADE LICENSE DATED 24.12.2020 ISSUED BY THE THEEKOY GRAMA PANCHAYAT ALONG WITH ENGLISH TRANSLATION

EXHIBIT P16 A TRUE COPY OF THE JUDGMENT IN [2002] 10 KTR 192 (Ker)

Exhibit P17 TRUE COPY OF THE APPLICATION FOR REGISTRATION FILED ON LINE BY THE PETITIONER (AS AVAILABLE FROM THE GST PORTAL NOW0

Exhibit P18 TRUE COPY OF THE NOTICE DATED 25/06/2020 ISSUED BY THE 1ST RESPONDENT DIRECTING TO PRODUCE LICENCE FROM THE LOCAL AUTHORITY

Exhibit P19 TRUE COPY OF THE CIRCULAR NO. 19/2018 ISSUED BY THE 4TH RESPONDENT NO. CT/11804/2018-CL DATED 07/09/2018

Exhibit P19(a) TRUE COPY OF THE CIRCULAR NO. 04/2019 ISSUED BY THE 4TH RESPONDENT IN CT/1267/2019-CQ DATED 07/05/2019

Exhibit P19(b) TRUE COPY OF THE CIRCULAR NO. 05/2020 ISSUED BY THE 4TH RESPONDENT