Allahabad HC: Tax Authority to Release Fresh Notice U/S 29(2) for Cancellation of GST Registration

The Allahabad High Court ordered the tax authorities to release a fresh notification regarding the GST registration cancellation merely on the basis of a firm being found fake under Section 29(2) of the Uttar Pradesh Goods and Services Tax Act, 2017 (UP GST).

The current writ petition challenges the respondent’s decision to revoke the petitioner’s GST registration, the respondent’s decision to deny the petitioner’s request to revoke the registration, the respondent’s directive to reject the assessee’s revocation application for cancellation of the GST registration, and also the appellate authority’s decision to uphold the respondent’s decision to deny the petitioner’s request to revoke the registration.

M/S Star Metal Company, the petitioner, was a proprietorship business. The petitioner asserted that the company had timely filed its returns and deposited all remaining taxes. The business location of the firm was not mentioned in the registration certificate during the survey that was undertaken at the petitioner’s place of business. As a result, the petitioner’s registration was cancelled.

The petitioner’s counsel argued that the orders in question were issued in violation of the provisions outlined in the GST Act and Rules, as the petitioner was not given an opportunity for a hearing. Additionally, it was pointed out that an order was already passed in March without granting the petitioner an opportunity for a hearing, making the subsequent notice issued on 26.04.2021 to show cause as to why the application for revocation of cancellation of registration could not be approved or issued.

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Furthermore, the petitioner’s counsel contended that the cancellation of registration is also unlawful because none of the conditions specified in section 29(2) of the UP GST Act are accordingly.

In contrast, the Standing Counsel maintained that the orders were lawfully issued, emphasising that during the inspection, the petitioner was not found and the firm was treated to be a bogus entity, passing the legality of the impugned orders.

Justice Piyush Agarwal, presiding over a Single Bench of the Allahabad High Court, relied on the judgement in the case of Apparent Marketing Private Limited, and observed that registration could not be rejected if one of the five statutory conditions is present. Simply labelling a firm as “bogus” does not suffice as a valid reason for cancellation.

The Bench further stated that it is within the authority of the respondent to issue a fresh notice citing specific grounds mentioned in section 29(2) of the GST Act. If such proceedings are initiated, they should be independently decided on their own merit without being influenced by any observations made in this particular order.