2024-VIL-1033-HP
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SGST High Court Cases

GST – Cancellation of registration in exercise of powers conferred under Rule 21(g) of the CGST Rules, 2017 - Petitioner challenge the cancellation of registration on the ground of violation of Rule 86B of the CGST Rules - use of the amount available in Electronic Credit Ledger to discharge output tax liability in excess of 99% - HELD - No doubt Rule 21(g) enables cancellation of GST Registration if there is a violation by registered person of Rule 86B, but one has to see whether the violation is serious enough to warrant cancellation of the GST Registration - the cancellation of GST registration was a disproportionate punishment for the violation of Rule 86B, as the petitioner had used its own money available in the Electronic Credit Ledger to discharge its tax liability, even in excess of 99% of such liability - there was no loss caused to the Department and the petitioner had not defaulted in payment of taxes – the Rule 86B lacked statutory backing and appeared to be ultra vires the GST Act. Accordingly, the cancellation order is set aside and the respondents are directed to restore the petitioner's GST registration – the writ petition is allowed - Whether the cancellation of GST registration based on a "prima facie" investigation was justified – HELD - the cancellation of GST registration based on a "prima facie" investigation, without the investigation being completed, was arbitrary, unreasonable and violated Article 14 of the Constitution - the respondents should have waited for the investigation to be completed before imposing the extreme penalty of cancellation of GST registration.
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