GST Act | Registration Can Only Be Cancelled U/S 29 Read With Rule 21, No Aid Can Be Taken From Any Other Statute: Allahabad HC Reiterates

Introduction

In a recent ruling, the Allahabad High Court clarified the procedure for canceling Goods and Service Tax (GST) registration. The court emphasized that GST registration can only be canceled under Section 29 of the GST Act, 2017, read with Rule 21 of the GST Rules, 2017. The decision highlights the need for adhering to the specific provisions outlined in the GST Act for canceling registration and prohibits seeking aid from any other statute. This article examines the implications of the Allahabad High Court ruling and the significance of following the correct procedure for canceling GST registration.

Background

The case involved a registered business that engaged in the purchase and sale of coal on a retail basis. The business qualified for the compounding scheme under Section 9(1) of the UPGST Act due to its turnover being above Rs. 50 lakhs. The Taxation Officer issued a show cause notice proposing the cancellation of the business's GST registration. The notice was accompanied by a direction from the Taj Trapezium Zone Pollution (Prevention and Control) Authority (TTZ Authority) and a written direction from JC (SIB)-B Agra for canceling the registration of all coal depots. The registration was subsequently canceled with retrospective effect, and the business's appeal against the cancellation was dismissed.

The Argument for Correct GST Cancellation Procedure

The counsel for the petitioner argued that the GST Act is a self-contained code, and the cancellation of registration should adhere to the requirements outlined in Section 29 of the UPGST Act, read with Rule 21 of the GST Rules. Since the petitioner did not violate any provisions of the GST Act, the cancellation order was deemed invalid. Furthermore, the petitioner claimed that they were not served with copies of the directions issued by JC (SIB)-B Agra and the TTZ Authority. They also contended that the cancellation order was a non-speaking order and lacked the application of mind.

The petitioner relied on a previous judgment by the Allahabad High Court in M/S Videocon D2h Ltd. Vs. State of U.P. and 3 Ors., which stated that an order cannot be passed ex-parte if the petitioner did not appear on the next date after the fixed date for submitting a reply.

The Court's Verdict

The Allahabad High Court examined the relevant sections of the Environment (Protection) Act, 1986, and the GST Act to determine the validity of the cancellation order. The court noted that under Section 5 of the Act of 1986, any authority or officer is bound by the directions issued by the Central Government regarding industry only. The court further held that Section 24 of the Act of 1986 clearly states that if an offense is punishable under the Act of 1986 as well as any other enactment, the offender shall be liable to be punished under the other act and not under the Act of 1986.

The court emphasized that any direction given by the TTZ Authorities for the cancellation of registration must be in accordance with Section 29 read with Rule 21 of the GST Act and the rules therein. The GST authorities cannot blindly follow the directions of the TTZ Authorities. The court also highlighted the importance of interpreting taxing statutes literally, as established in the Supreme Court case Union of India and others Vs. Ind-swift Laboratories Limited.

The court referred to a previous judgment in Agra Coal Suppliers Vs. State of U.P., Thru' Principal Secry., Instt. Finance & Anr., which held that the registration of coal dealers cannot be canceled unless they are operating within the Taj Corridor and causing pollution affecting the quality of life, including the Taj Mahal.

The court concluded that the cancellation order lacked findings regarding the petitioner's failure to maintain books and records. Therefore, the order for cancellation of the petitioner's GST registration was quashed, and the authorities were directed to reinstate the registration certificate with retrospective effect.

Conclusion

The Allahabad High Court's ruling underscores the importance of following the correct procedure for canceling GST registration. GST registration can only be canceled under Section 29 of the GST Act, read with Rule 21 of the GST Rules. The court's decision prohibits seeking aid from any other statute for the purpose of canceling registration. It is crucial for businesses and authorities to adhere to the provisions outlined in the GST Act to ensure a fair and lawful cancellation process. By following the correct procedure, businesses can avoid unnecessary legal complications and ensure compliance with the law.