Delhi HC: No Cancellation of a GSTIN on the Mere Instructions of Different Authority

The High Court of Delhi in the case of Kritika Agarwal Vs. Union of India and ORS. has ruled that GST Number cannot be cancelled just on the grounds of the direction of another authority.

The petitioner is primarily aggrieved over her GST Registration cancellation. The petitioner has also requested reimbursement of Rs. 20,00,000 (Rupees twenty lacs), which she claims was deposited under pressure by the respondent authorities rather than voluntarily.

However, the learned counsel for the petitioner observes that at this time, the petitioner does not intend to seek any relief in relation to the deposit of Rs. 20,00,000/- as sought in the matter. The petitioner, on the other hand, wishes to reserve her right to pursue applicable solutions in this regard at a later point, if necessary.

The petitioner claims to be engaged in the business of importing and distributing various types of chemicals, minerals, and lubricant preparations that fall under Chapters 27 and 34 of the Customs Tariff Act of 1975. She says that she has been running the business under the name and style of a sole proprietorship concern, ‘Vivaan International,’ since prior to the implementation of the GST on 01.07.2017, and that she was registered as a dealer under the Delhi Value Added Tax Act, 2004.

The petitioner claims that on 07.09.2022, the Central Tax CGST, Delhi North Commissionerate, visited and searched her premises. She adds that they also seized a few documents from her home without drafting a Panchnama. She claims she was not present during the search, but her father-in-law (Sh. Ashok Kumar Jain), who was present at the time of the incident, was compelled to make a statement.

He was also forced into depositing Rs. 20,00,000/-. Initially, Ashok Kumar Jain did not agree with the demand, but the concerned officers persisted. He gave in to their demand and deposited a sum of Rs. 10,00,000/- (Rupees ten lacs) through the DRC-03 form dated 07.09.2022, after conferring with the petitioner.

As mentioned above, the directive dated 28.10.2022, revoking the GST registration, had been passed merely on an order given by another authority. The main reason for cancelling the GST registration was that the DC (AE), CGST, North Delhi, had issued a letter dated 30.09.2022, ordering the cancellation of the registration of the taxpayer from the date of her GST registration, as disclosed in the Order-in-Original.

It is critical to note that the Order-in-Original dated 28.10.2022, included a tabular statement indicating that no tax was found payable. It is trite law that an authority vested with the authority to give a decision is required to exercise the power independently and cannot do so on the simple directives of another authority without independently convincing itself of the decision in question.

In this case, it is clear that the impugned Order-in-Original of 28.10.2022, was issued merely on the instructions of another authority, without even considering the petitioner’s response to the Show Cause Notice dated 06.10.2022. Simply put, the contested Order-in-Original dated 28.10.2022, cannot be upheld.

It is also worth observing that, according to the Show Cause Notice dated 06.10.2022, the petitioner’s GST Registration was instructed to be cancelled only on the grounds of failing to answer the summons issued under Section 70 of the CGST Act. The petitioner claimed that her accountant had been to the office and asked for an extension to prepare the documentation. The Order-in-Original dated 28.10.2022, makes no mention of the aforementioned issue.

The GST has been repealed. Registration of a taxpayer has far-reaching consequences for the taxpayer and has the potential to halt the taxpayer’s business. The legislation could never intend to inhibit anyone from conducting legal business.

As a result, the measure of GST cancellation should be used with caution and only when absolutely necessary.

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Given the above-mentioned facts, the challenged Show Cause Notice dated 06.10.2022, was overruled, the Order-in-Original dated 28.10.2022, and the Order-in-Appeal on 30.05.2023. It is also stated that if the respondent authority wishes to suggest any adverse action against the petitioner, it may do so by issuing an appropriate Show Cause Notice outlining the grounds for the proposed action. Needless to say, any orders issued in response to the aforementioned Show Cause Notice would be informed of the reasons.

The petition is dismissed after learning the given facts. All pending applications are also dismissed.