Sant Ram Vs. Delhi State GST and Ors.

Citation: 2023: DHC:8838-DB

Delhi High Court

Date of Judgment/Order: 11.12.2023

Fact

The petitioner, Sant Ram, filed a writ petition challenging the Show Cause Notice (SCN) dated 19.09.2022 and the subsequent order dated 11.07.2023, which canceled his GST registration with retrospective effect from 30.11.2020. The SCN cited a letter received from the Deputy Commissioner (A.E) as the reason for proposing the cancellation.

Issue:

1. Validity of the SCN: The SCN was issued based on a letter from another authority, without providing specific details or attaching the letter itself.
2. Sufficiency of Reasons: The order cancelling the GST registration was deemed unsustainable because it lacked sufficient reasons and failed to indicate that the Proper Officer was satisfied as to the conditions required under Section 29 of the CGST Act.

Rule:

Section 29 of the CGST Act, 2017: This section outlines the circumstances under which a Proper Officer may cancel a GST registration, either on their own motion or upon application by the registered person. It specifies various conditions under which cancellation can occur, including non-compliance with provisions of the Act, failure to furnish returns, and fraud.

Analysis:

1. Independence of the Proper Officer: The court emphasized that the Proper Officer must independently arrive at a satisfaction regarding the circumstances warranting cancellation as set out in Section 29(1) or 29(2) of the CGST Act, 2017. The officer cannot act mechanically based on instructions from another authority.
2. Precedents Cited:
   • Sirpur Paper Mills Ltd. v. The Commissioner of Wealth Tax, Hyderabad: Highlighted that discretion vested in an authority must be exercised independently.
   • Union of India & Ors. v. Bharat Forge Ltd. & Anr.: Reinforced the requirement for independent application of mind by the authority.
   • Kritika Agarwal v. Union of India & Ors.: Reiterated that decisions must be informed by specific and sufficient reasons.
3. Deficiency in the SCN and Order: The SCN did not provide specific reasons or attach the letter it referenced, and the cancellation order simply cited “Others” as the reason without detailing the satisfaction of conditions under Section 29 of the CGST Act.

The Delhi High Court found the impugned SCN and cancellation order to be legally unsustainable. The court allowed the petition and set aside the order cancelling the petitioner’s GST registration. The respondents were directed to restore the petitioner’s GST registration immediately. However, the court clarified that the respondents are not precluded from taking further lawful action if they find any statutory violations by the petitioner.

Conclusion:

This case underscores the necessity for Proper Officers to exercise their discretion independently and provide detailed reasons when cancelling GST registrations. It reinforces the principle that administrative decisions must be informed by specific statutory provisions and not be based on mechanical or arbitrary instructions from other authorities.