WP(C) No. 25716 of 2023

Facts of the Case

The petitioner's GST registration was cancelled by order dated 20.04.2023 on the ground that he had issued invoices and bills to other dealers without actual supply of goods or services, enabling those dealers to avail input tax credit or refund based on such fake invoices, in violation of the GST Act. Acting on intelligence regarding a fake-invoicing cartel, the Directorate General of GST Intelligence (DGGI), Kochi Zonal Unit, by letter dated 09/11.03.2023, directed the Range Officer, Ottapalam, to cancel the petitioner's registration under Section 29(2)(a) read with Rule 21(e) of the CGST Rules. A first show cause notice dated 15.03.2023 (without a specified hearing date) was withdrawn on 27.03.2023, and a second, near-identical notice dated 28.03.2023 went unanswered; personal hearing dates fixed for 27.03.2023 and 19.04.2023 saw no appearance by the petitioner, leading to the impugned cancellation order.

Issues Involved

  1. Whether the local Superintendent could pass a cancellation order merely implementing DGGI's direction, without independently applying his own mind to the material.
  2. Whether the process leading to cancellation complied with due process and the requirement of an independent decision by the competent authority.

Petitioner's Arguments

  • Counsel for the petitioner submitted that once the DGGI, Kochi Zonal Unit, had already taken a decision and directed cancellation, the competent authority could not have taken an independent decision contrary to that direction, rendering the exercise a mere formality.
  • It was further argued that the cancellation direction itself was issued without following due process prescribed under the statute and rules, making the impugned order without jurisdiction.

Respondent's Arguments

  • The respondent submitted that a large cartel was operating for availing fake input tax credit, that intelligence and investigation confirmed this, and that show cause notices and hearing opportunities were duly issued to the petitioner, who failed to avail them or produce any documents in response.

Court Order / Findings

  • The Court found no denial of the fact that the DGGI, Kochi Zonal Unit, had already taken the decision to cancel the registration before the local competent authority issued its notices.
  • The Court held that the competent authority was only required to complete formalities and could not have taken an independent decision, since it had merely implemented the direction already given by the DGGI, and accordingly set aside the impugned order, though clarifying it would not stand revived for one month.
  • The petitioner was directed to appear before the Superintendent with relevant records on 18.09.2023, with adverse material to be furnished to him, and a fresh order to be passed within three weeks after hearing, expressly directing that the Superintendent take an independent decision uninfluenced by the DGGI's direction. The writ petition was disposed of accordingly.

Important Clarification

  • Where a superior investigative authority (such as DGGI) directs a jurisdictional officer to cancel a registration, the jurisdictional officer must still independently apply his own mind to the material and the taxpayer's response — merely rubber-stamping the direction renders the resulting order without jurisdiction.
  • Courts setting aside such orders will often expressly direct the authority to decide afresh "uninfluenced" by the superior authority's direction, to ensure the independence of the fresh adjudication.

Sections Involved

  • Section 29(2)(a), CGST Act, 2017 — cancellation of registration where a taxpayer has issued invoices without supply of goods or services.
  • Rule 21(e), CGST Rules, 2017 — specifies issuance of invoice without supply as a ground for cancellation.

Decision – In Favour of

The petition was disposed of with directions rather than a clean win: the cancellation order was set aside for lack of independent application of mind, but the matter was remitted for a fresh, independent decision on the substantive allegations, leaving the outcome open.

Case Details

Court: High Court of Kerala at Ernakulam
Case Number: WP(C) No. 25716 of 2023
Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
Date of Order: 13.09.2023

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