Facts of the Case

M/S. Steel India, a Thrissur-based partnership firm trading in iron and steel, represented by its managing partner, was registered under the Kerala VAT Act until 30.06.2017 and thereafter under the CGST/SGST Act, 2017. The petitioner claimed to have temporarily stopped business activities from 1st October 2022 for unforeseen reasons while continuing to file returns. A show cause notice dated 13.06.2023 was issued under Section 29(2)(e) read with Rule 21(a) of the CGST/SGST Rules, alleging that the petitioner did not conduct business from its declared premises and issued invoices without supply of goods. Despite the petitioner's reply dated 21.06.2023, the registration was cancelled with effect from 1st July 2017 via Exts.P4 and P5 dated 24.06.2023, with directions to file a final return in Form GSTR-10 and clear pending returns.

Issues Involved

  1. Whether the cancellation order was vitiated for want of cross-examination of the landlord whose statement was relied upon by the tax authority.
  2. Whether the petitioner had, in fact, discharged the burden of proving it conducted business from the declared premises.
  3. Whether the enquiry conducted before cancellation satisfied principles of natural justice.

Petitioner's Arguments

  • The show cause notice did not disclose the landlord's statement relied upon regarding business activity at the declared premises, and the petitioner ought to have been afforded an opportunity to cross-examine the landlord, relying on the Supreme Court's ruling in C.K.Sunny v Sales Tax Officer.
  • Mere default in rent payment for a few months did not mean the petitioner had been ousted from the premises, and the impugned orders were illegal, arbitrary and unjustified.
  • Though an appellate remedy existed, the petitioner approached the Court directly citing violation of natural justice.

Respondent's Arguments

  • Section 29(2) and Rule 21(a) do not provide a right of cross-examination of persons whose statements are relied upon regarding business activity at the declared address.
  • It was for the petitioner to prove it was carrying on business from the declared premises; no such evidence was produced, and enquiries confirmed no business activity was being conducted there.
  • The petitioner had an appellate remedy, and there was no violation of natural justice warranting interference at the threshold.

Court Order/Findings

  • The Court examined the landlord's statement, which indicated the premises were rented to the petitioner only until May 2017 and thereafter let out to another person from August 2017, and noted the petitioner produced no documentary or oral evidence of continuing business from the declared address.
  • Distinguishing the cross-examination right recognised in K.T.Shaduli (which applied to assessment of returns) as inapplicable to a summary cancellation-of-registration enquiry under Section 29(2)(e)/Rule 21(a), the Court held that the petitioner was given adequate opportunity to reply and produce evidence, and no infraction of natural justice or arbitrariness was established.
  • The writ petition was dismissed, with liberty for the petitioner to file a statutory appeal, to be considered expeditiously without being influenced by the Court's observations.

Important Clarification

In summary proceedings for cancellation of GST registration under Section 29(2)(e) read with Rule 21(a) — for not conducting business from the declared premises — the assessee does not have an automatic right to cross-examine third-party witnesses (such as a landlord) whose statements form part of the enquiry; the burden lies on the assessee to produce affirmative documentary or oral evidence of continued business activity at the declared address, and failure to do so will not, by itself, amount to a natural justice violation.

Sections Involved

  • Section 29(2)(e), CGST/SGST Act, 2017 — empowers cancellation of registration for contravention of prescribed provisions, including non-conduct of business from the declared place.
  • Rule 21(a), CGST/SGST Rules, 2017 — specifies that registration is liable to cancellation if the person does not conduct any business from the declared place of business.

Decision – In Favour of

The decision favours the Department: the writ petition was dismissed, upholding the cancellation of GST registration, though the petitioner retains statutory liberty to file an appeal on merits.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No. 29033 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
  • Decision Date: 05-10-2023
  • Disposal Nature: Dismissed

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