Kerala HC: Superintendent to Take Autonomous Judgment Without Influence in the Matter of GSTIN Cancellation

The Superintendent of Central Tax must make an unbiased decision independently, unaffected by the guidance from the DGGI, Kochi Zonal Unit, the Kerala High Court has ruled.

Justice Dinesh Kumar Singh’s bench has noted that the DGGI, Kochi Zonal Unit had already made the decision to cancel the GST registration of the petitioner. The competent authority was only required to complete the formalities, and it was not within their purview to make an independent decision. As a result, the contested order is annulled. However, the order will remain inactive for one month.

The petitioner, or the entity being assessed, has issued invoices or bills to other dealers without actually delivering goods or providing services, thus violating the GST Act and Rules. This violation in generating GST invoices and bills has been exploited by purchasing dealers to claim input tax credits or tax refunds.

Following intelligence reports about fraudulent GST invoicing, the DGGI, Kochi Zonal Unit instructed the Range Officer, Ottappalam Range, to revoke the petitioner’s GST registration under Section 29(2)(a) in conjunction with Rule 21(e) of the CGST Act/Rules, 2017.

The petitioner lodged a challenge against the revocation of their GST registration by the DGGI, Kochi Zonal Unit. The principal reason for this revocation was their issuance of invoices and bills to other dealers without actually providing goods or services, a violation of the GST Act and its associated regulations. Additionally, intelligence reports suggested potential involvement in fraudulent invoicing.

The petitioner initially obtained the show-cause notice (SCN) and responded accordingly. However, the notice failed to specify the location for the petitioner’s personal hearing and was subsequently cancelled. Subsequently, another show cause notice was issued, but the petitioner did not provide a response.

The petitioner argued that since the DGGI Cochin Unit had already made a decision and directed the cancellation of their GST registration, the competent authority could not make a contrary decision. They contended that the cancellation directive did not adhere to the legal due process outlined in the statutes and regulations, rendering it entirely without jurisdiction and in violation of the law. Consequently, they sought the annulment of the order.

A substantial cartel was engaging in the illicit utilization of fake input tax credits (ITC), the department asserted. Following intelligence reports and investigations into this cartel, it was verified that they were indeed exploiting fake input tax credits.

As a result, the DGGI, Kochi Zonal Unit was instructed to cancel the petitioner’s GST registration. The petitioner was provided with a show-cause notice and an opportunity to be heard. However, the petitioner did not avail themselves of this opportunity, failing to produce any documents, leading to the issuance of the order.

Recommended: DGGI Issues GST Notices to Companies Over Corporate Guarantees

Before the Superintendent of Central Tax and Central Excise in Ottapalam, the court instructed the applicant to appear, bringing with them any relevant records to challenge the allegations presented in the show-cause notice. Also, any adverse proof gathered against the petitioner must be made available to them for their examination.

Following the collection of evidence from the petitioner and the provision of a fair hearing, a new decision will be made in accordance with the law within three weeks from September 18, 2023. Should the show cause notice to be withdrawn, the petitioner will have the right to have their GST registration certificate reinstated.

However, if the authority proceeds with the cancellation of the petitioner’s GST registration, they can pursue appropriate legal avenues as per the available options under the law.