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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Ajay Kumar Jindal Prop. of M/s A. S. Fastener – Appellant
Versus
Superintendent, Ward 71, Central Goods And Services Tax, Delhi & Ors. – Respondents
W.P.(C) 258 of 2023
Decided On : 23-03-2023
GST Registration - Cancellation - Refund of ITC - Central Goods and Services Tax Act, 2017 - Section 29(2)
Fact of the Case:
The petitioner's GST registration was cancelled ab-initio, and the claim for input tax credit (ITC) refund was rejected due to the petitioner being found non-existent and non-functional at the registered place of business. The petitioner's appeal against the cancellation and rejection of ITC refund was also dismissed.
Finding of the Court:
The court found that the petitioner had shifted the business to Haryana and continued it in partnership, and had obtained GST registration for the new place of business. The court held that the cancellation of the petitioner's registration from the date of its original registration was unjustified, and directed the authorities to initiate proceedings for cancellation from the date of the business transfer. The court also set aside the rejection of the petitioner's application for refund and directed reconsideration.
Issues: Cancellation of GST registration, Rejection of ITC refund, Non-filing of returns for transfer of stock and capital goods
Ratio Decidendi: The court held that the cancellation of the petitioner's registration from the date of its original registration was unjustified, and directed the authorities to initiate proceedings for cancellation from the date of the business transfer. The court also set aside the rejection of the petitioner's application for refund and directed reconsideration.
Final Decision: The impugned order cancelling the petitioner's registration with effect from the original registration date was set aside, and the authorities were directed to initiate proceedings for cancellation from the date of the business transfer. The rejection of the petitioner's application for refund was also set aside, and the authorities were directed to reconsider the application.
JUDGMENT
Vibhu Bakhru, J.
1. The petitioner has filed the present petition impugning an order dated 31.10.2022 passed by respondent no.3 [the Joint Commissioner, Central Goods and Service Tax (CGST), Appeals-I, Delhi - hereafter `the Appellate Authority'], whereby the petitioner's appeal against an order dated 22.02.2022 passed by respondent no.2 [the Deputy Commissioner, Ward 71, CGST Delhi - hereafter `the Adjudicating Authority'], was rejected.
2. By the order dated 22.02.2022, respondent no.2 had rejected, the petitioner's application seeking restoration of his Goods and Service Tax (GST) registration, which was canceled ab-initio.
3. The petitioner also impugns an order dated 09.03.2022 passed by respondent no.2, rejecting the petitioner's claim for input tax credit (hereafter `ITC') of Rs.24,91,347/- (Twenty Four Lakh Ninety One Thousand Three Hundred And Forty Seven Rupees). The petitioner's claim for refund of ITC was rejected because the petitioner was found to be non-existent and non-functional at the registered place of business. The said order is also inextricably linked with the cancellation of the petitioner's GST registration.
4. The petitioner is, essentially, aggrieved by the denial of ITC refund consequent to the cancellation of its GST registration.
Brief Facts
5. The petitioner is, inter alia, engaged in the business of manufacturing and supply of zipper fasteners, zipper sliders and other related products. The petitioner carries on his business under the name and style of his sole proprietorship concern named M/s A. S. Fastener. The said concern, with its principal place of business at Khasra No.80, Gali No.4, Samaypur Village, North West Delhi, Delhi, 110042, was registered under the Central Goods and Services Tax Act, 2017 (hereafter `the Act') with effect from 02.07.2017 (bearing GST Registration No.07AGCPJ2410P2ZG).
6. The petitioner regularly filed its GST returns and also paid the taxes as due. The petitioner has filed the statement of taxes paid during the period 01.07.2017 to 31.03.2022 and the said statement is not disputed by the respondent.
7. The petitioner claims that it formed a partnership with one Mr. Tarun Goyal on 31.07.2021, and commenced the same business in the name of M/s A. S. Fastener in Haryana with effect from the said date, that is 31.07.2021.
8. The said firm (M/s A. S. Fastener) was also registered with the GST authorities under the GST Registration No. 06ABVFA5901G1ZD with its principal place of business at Plot No.571, Phase II, HHSIIDC, Barhi, Ganaur, Sonipat, Haryana, 131101.
9. The petitioner applied for refund of the amount lying in his Electronic Cash Ledger (ECL) on 27.09.2021, which was allowed by an order dated 25.11.2021. Thereafter, on 12.11.2021, the petitioner filed an application for refund of the accumulated ITC of Rs.24,91,347/- (Rs.3,07,643 as Central Tax and Rs.21,83,704 as State Tax) for the period April, 2020 to March, 2021. The petitioner claims that the said ITC was accumulated due to inverted tax structure and was liable to be refunded.
10. The respondent states that one of the GST officials visited the erstwhile premises of the petitioner at Khasra No.80, Gali No.4, Samaypur Village, North West Delhi, Delhi, 110042 on 03.01.2022 without any intimation to the petitioner. Admittedly, the petitioner had ceased its business from the said premises prior to 03.01.2022.
11. On 04.01.2022, respondent no.2 issued a show-cause notice calling upon the petitioner to show cause why its application for refund of ITC of Rs.24,91,347/- not be rejected. The show-cause notice flagged seven issues. The first related to the mismatch of payment of taxes. The show-cause notice mentioned that the tax liability, as declared in the GSTR-1 did not match with the payment of tax in GSTR-3B. The concerned authority found that there was a difference of Rs.14,916/- between the tax liability as declared in GSTR-1 and as paid under GSTR-3B. The second issue related to the diff
The court emphasized that the cancellation of GST registration and denial of ITC refund should be based on justified grounds and directed the authorities to reconsider the petitioner's application fo....
The taxpayer must substantiate claims for input tax credit with adequate proof of genuine transactions; failure to do so justifies the cancellation of GST registration.
The cancellation of registration must satisfy the requirements of Section 29 of the CGST Act. The show-cause notice for cancellation must contain specific allegations and proposed evidence. The order....
An adjudicating authority exercising statutory power to cancel tax registration must record clear reasons for its decision. As a matter of natural justice and fair procedure, an order devoid of reaso....
An order cancelling a registration under statutory provisions must be a speaking order, assigning specific reasons for the decision. The failure of an assessee to respond to a show cause notice does ....
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