Facts of the Case

The petitioner, Bhupendra Singh, ran a proprietorship, M/s Bhaiji and Company, dealing as a stockist of RBM, Reta, Bajri etc., registered under GST with Registration No. 05AUYPS2644A1ZG. His premises were physically inspected by the competent authority on 19.07.2022, without prior notice, after repeated unanswered telephonic attempts. A show cause notice dated 06.08.2022, uploaded on the GST portal, required him to appear on 19.08.2022 — a date subsequently declared a holiday — without providing any alternate date, and the registration was cancelled on 23.08.2022.

Issues Involved

  1. Whether physical verification of business premises under Rule 25 of the CGST Rules can be validly conducted without prior notice to the registrant.
  2. Whether a vague, unsigned show cause notice, followed by cancellation without a genuine hearing opportunity, satisfies the requirement of Section 29(2) of the CGST Act.

Petitioner's Arguments

  • The notice dated 06.08.2022 was vague, did not identify the officer before whom to appear, and fixed a hearing date (19.08.2022) that was later declared a holiday, with no further notice of any adjourned date ever issued.
  • Rule 25 of the CGST Rules requires physical verification to be conducted in the presence of the registrant, which had not happened; the inspection report was also never uploaded on the portal as required.
  • The cancellation order itself was self-contradictory, stating both that it had reference to the petitioner's reply dated 21.08.2022 and, in the same document, that no reply had been submitted.

Respondent's Arguments

  • The department had made multiple telephonic attempts to inform the petitioner of the inspection date, which went unanswered and uncalled back, and communication had been made per Section 169 of the Act.
  • It was submitted that no notice was required for a "surprise inspection," and that the show cause notice and cancellation followed the process contemplated under the Act.

Court Order / Findings

  • The Court rejected the "surprise inspection" argument, holding that Rule 25 mandates verification in the presence of the registrant, which can only be secured by informing him of the date and time of inspection; a mere unanswered/unreturned phone call does not amount to compliance, and the inspection report was never uploaded on the portal.
  • The Court found the show cause notice dated 06.08.2022 vague — not identifying the signing officer, fixing a hearing date that later became a holiday without any substitute date being communicated — and held that the impugned cancellation order dated 23.08.2022, which self-contradictorily referred to both a reply received and no reply received, reflected non-compliance with the mandatory requirement under the proviso to Section 29(2) that no cancellation be made without affording an opportunity of hearing.
  • The Court quashed both the show cause notice dated 06.08.2022 and the cancellation order dated 23.08.2022, allowing the writ petition.

Important Clarification

Physical verification of business premises under Rule 25 of the CGST Rules must be conducted in the registrant's presence, which requires informing them in advance of the date and time; an unanswered telephone call does not discharge this obligation. A cancellation order that is internally inconsistent — simultaneously acknowledging and denying receipt of a reply — demonstrates non-compliance with the mandatory hearing requirement under the proviso to Section 29(2) of the CGST Act and is liable to be quashed.

Sections Involved

  • Section 29, CGST Act, 2017 — governs cancellation of registration; its proviso to sub-section (2) mandates an opportunity of hearing before cancellation.
  • Section 169, CGST Act, 2017 — prescribes the modes of valid service of notices and orders.
  • Rule 25, CGST Rules, 2017 — requires physical verification of business premises to be conducted in the registrant's presence, with the report uploaded on the portal.

Decision – In Favour of

In favour of the Assessee — both the show cause notice and the cancellation order were quashed.

Case Details

  • Court: High Court of Uttarakhand at Nainital
  • Case Number: Writ Petition (M/S) No. 796 of 2023
  • CNR / Citation: Writ Petition (M/S) No. 796 of 2023
  • Coram: Hon'ble Ravindra Maithani, J.
  • Date of Order: 4 August 2023

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