Rajasthan High Court: Proceedings of Cancellation of GST Registration Cannot Be Kept Hanging Fire
The Court termed the suspension of registration worse than cancellation as leaves the alleged defaulter with no legal avenue
The High Court of Rajasthan allowed the Petitioner – Assessee before the Respondent – Assessing Authority, concerning the suspension of his registration certificate.
A single-judge Court of Justice Dinesh Mehta dealt with this matter titled M/s Avon Udhyog v State Of Rajasthan And Ors.
The factual background of this case is that after the premises of the Petitioner was searched, the Petitioner's registration certificate was suspended through notice-cum-order dated 4 February 2021. The Petitioner – Assessee submitted that he furnished his detailed reply/response on 20 March 2021 but the Respondent – Assessing Authority has not passed any final order regarding Petitioner's registration, due to which Petitioner's right to trade has been kept in suspended animation. It was submitted by the Petitioner that the principles of natural justice warrant that before suspending a license, a reasonable opportunity of hearing must be granted to an assessee as per Section 29 of the Rajasthan Goods and Service Tax Act, 2017, amended vide Finance Act, 2020 and Rules 21 and 22 of the Rules framed thereunder.
On the other hand, the Respondents submitted that the Petitioner was required to file a reply to the notice within seven days but failed to file the reply within the stipulated time and the same came to be filed as late as 20 March 2021. It was, therefore, argued by the Respondents that the Petitioner could not raise a grievance and level allegation of protraction of the proceedings by the Respondent – Assessing Authority.
The judge went through the Sub-rule (3) of Rule 22, which clearly showed that the authority concerned is required to cancel the registration (if required) within 30 days of the date of the reply to the show-cause notice. It further observed that notice dated 4 February 2021 requiring the Petitioner – Assessee to file a reply within seven days from the date of service of the notice itself was contrary to the statutory provisions.
The Court noted that the reading of sub-rule (2A) reveals that the Assessing Authority was required to give 30 days to explain the reason why the registration ought not to be cancelled. It further noted that more than three months have passed since the Petitioner – Assessee filed a reply before the Respondent on 20 March 2021.
The Court made the following observations regarding the suspension of registration:
"Suspension of a registration of an assessee has its own consequences – it brings the entire business of an assessee to a standstill. In a way it is worse than cancellation. Against cancellation, an assessee can take legal remedies but against suspension pending an enquiry, even if the assessee chooses to take remedies, the authorities or the Court(s) would normally show reluctance."
The Court opined that the proceedings of cancellation of registration cannot be kept hanging fire on any pretext, including that assessee failed to file the reply within the time allowed.
The Court concluded that the Authority issuing the notice was statutorily bound to pass an order in terms of sub-rule (3) of Rule 22 of the Rules. The Petition was disposed of with a direction to the Respondents to provide an opportunity of hearing to the Petitioner and to pass a speaking order in accordance with the law.