FEBRUARY 14, 2024

By Vijay Kumar

IN an order last week, the Delhi High Court in Satendra Vs Superintendent, Central Goods and Services Tax (2024-TIOL-186-HC-DEL-GST) observed:

Petitioner impugns order dated 28.07.2023, whereby GST registration of the petitioner was cancelled with effect from 05.12.2022. Vide Show Cause Notice dated 17.04.2023, petitioner was called upon to show cause as to why the registration be not cancelled for the following reasons: -

"Issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax."

The High Court noted: -

1. The Show Cause Notice states that invoice or bill has been issued by the petitioner without supply of goods and/or services leading to wrongful availment or utilization of input tax credit or refund of tax.

2. No particulars or details have been mentioned in the Show Cause Notice. There is no reference to any invoice or bill which the petitioner is alleged to have issued without making any supplies.

3. The Show Cause Notice extracts the reason in a standard format as there are several other options mentioned in the reason i.e. "without supply of goods and/or services" and "leading to wrongful availment or utilization of input tax credit or refund of tax".

4. It appears that the department is using a template for issuing said notices without providing any particulars. There is no clarity as to whether the petitioner has issued invoices or bills without supply or the action of the petitioner has led to wrongful availment or utilization of input tax credit or refund of tax.

5. Further, the Show Cause Notice also does not mention the quantum of wrongful availment of input tax credit or any refund claimed on the said account.

6. Perusal of the Notice also shows that it required the petitioner to appear before the undersigned on 01.05.2023, however, the Notice neither bears the name, nor the designation of any officer who has issued the notice.

Consequent to the Notice an order was passed by the Jest GST Officer and the Court observed: -

1. The impugned order also does not state any reasons for cancellation of the GST registration retrospectively except to state that no reply to the show cause notice has been received.

2. Further, the application filed by the petitioner seeking revocation of the cancellation has been rejected by a cryptic order that the party did not respond to the query.

3. The impugned order also seeks to cancel the registration with effect from 05.12.2022. There is no material on record to show as to why the registration is sought to be cancelled retrospectively. There is no material to show that there was any wrongful availment or utilization of input tax credit effective from the date of registration till the issuance of the show cause notice.

4. Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.

The High Court ordered:

1. Both the show cause notices and the impugned order are bereft of any reasoning and particulars and are accordingly not sustainable.

2. In view of the above, the Show Cause Notice as well as the impugned order are set aside.

3. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner .

Maybe they can design a draft Show Cause Notice proforma which would read as:

Whereas it appears to me that you have contravened the provisions of the GST Act read with any other Law in force at any time, you are hereby required to show cause as to why appropriate action under the relevant law(s) as may appear to the Adjudicating Authority to be just and legal, cannot be taken against you. In case you wish to be heard in person before the case is decided, you may appear before the proper officer in his office at 3.30 pm or 3.31 pm or 3.32 pm tomorrow. Please note that no further date or time will be given for personal hearing.

If you are willing to avoid unnecessary formalities, like reply to Show Cause Notice, Personal Hearing etc., the draft order is attached herewith which you can accept by a letter to this office and it will be deemed as the Adjudication Order. If you do not accept the draft order, you may communicate that to the Proper Officer within seven days and thereupon all coercive steps will be initiated against you as thought fit and proper by the Proper Officer.

Even after nearly seven years of GST and eighty years of Central Excise, are we still learning the basics of ‘Show Cause Notices” and ‘Adjudication'? Don't they teach the officers how to issue show cause notices. We have a famous internationally acclaimed Academy – NACIN, which was visited by even the Prime Minister recently. Is it not part of their teachings?

Is it not atrocious that the SCN does not mention any details of the contraventions and not even the name of that mysterious undersigned officer before whom the harried taxpayer was required to attend. As such we have hundreds of GST offices and even in a GST building, it is almost impossible to locate a particular office, even if you have the details. What if you are not told who this undersigned is?

The High Courts have the power to strike down provisions of an Act as passed by Parliament. Bringing into existence of an Act is an elaborate process where several officers of the Ministry concerned and the Law Ministry work hard to prepare the draft Bill, the Minister concerned has to thoroughly read it and the connected papers and present the Bill to Parliament; the minister should be able to defend the Bill in Parliament before it is passed by over 700 parliamentarians and finally assented to by the President. And our High Court can just strike down such an Act.

Here in this case, the High Court was called upon to quash a silly defective Show Cause Notice issued by a Superintendent! Can you think of better ways to waste the precious time of a High Court? It is not as if the High Courts are looking for work, waiting for an enterprising Superintendent to issue such sham of a Show Cause Notice, so that the court can adjudicate it. Every High Court is almost full to the brim with very important cases pending for years together and it is unfair to the system to allow the high courts to be used for such silly and simple issues; if only the GST officers could show some kindness to the overburdened judicial system of the country!

And can't you be a little more careful while trying to cancel somebody's registration – you are hitting at his stomach – that small careless paper is going to throw him on to the streets. Why to cancel a registration? You can take all actions against him while he is still registered with you. If he is registered, there is a chance that he would pay some tax. Why do you want to kill that goose?

And what have you achieved? You issue a template of a Show Cause Notice, give him a personal hearing before a mystical officer and cancel his registration retrospectively. The High Court strikes down the whole drama and you are where you began. Had you given a proper Show Cause Notice, hearing and order, your actions would have been sustained and the effort. money and time spent in pursuing the matter in the High Court could have been saved. But that is not how the government works. All the dramatis personae involved in this sordid drama would happily collect their pay checks while the unfortunate taxpayer for the sin of having embarked upon an enterprise that would bring in some tax for the government would still be running around clutching on to that templated illegal show cause notice. And he is told that it is part of ease of doing business !

GST was started as a good and simple tax and it was not meant to be an instrument to clog the courts. The Courts are too generous with these officers, but they (the officers) should not take the generosity for granted. To start with, they can learn to issue proper show cause notices.

Until next week