Allahabad High Court Reiterates: Registration Can Be Canceled Under GST Act and Rules and No Aid Allowed From Another Statute

Allahabad High Court Reiterates: Registration Can Be Canceled Under GST Act and Rules and No Aid Allowed From Another Statute

Asserts that the Taj Trapezium (Prevention and Control) Authority was constituted to exercise the powers conferred under the Environment Protection Act

The Allahabad High Court has reiterated that the Goods and Services Tax (GST) registration can only be canceled under Section 29 of the Goods and Service Tax Act, 2017 read with Rule 21 of the GST Rules, 2017.

The bench comprising Justice Piyush Agrawal stated that to cancel the GST registration, no assistance could be taken from any other statute. He referred to the decision of the Supreme Court in the Union of India and others vs. Ind- swift Laboratories Limited.

The Judge held, “The Apex Court has categorically held that a taxing statute must be interpreted in the light of what is clearly expressed. It means that Section 29 read with Rule 21 provides a complete mechanism under which the registration can be canceled, and no aid can be taken by any other statute.”

The Court held that any direction for cancellation of registration by the Taj Trapezium Zone Pollution (Prevention and Control) Authority constituted under the Environment (Protection) Act, 1986, would remain subject to Section 29 of the GST Act read with Rule 21 of the GST Rules.

The petitioner, a registered firm, deals in the sale and purchase of a coal on retail basis. Its business turnover being above Rs.50 lakhs, the petitioner opted for a compounding scheme under Section 9(1) of the Uttar Pradesh GST Act.

A show-cause notice was issued to the petitioner proposing cancellation of its GST registration, along with the direction of the Taj Authority and the direction of JC (SIB)-B Agra, for cancellation of registration of the coal depot.

Dissatisfied with the petitioner’s response, its registration was cancelled with retrospective effect. The appeal of the petitioner against the cancelation was also dismissed.

The counsel for the petitioner submitted that the GST Act was a complete Code. Thus, the cancellation of registration requirements mentioned in Section 29 of the UP GST Act read with Rule 21 of the Rules should be fulfilled. Since the petitioner had not violated any provision, the impugned cancellation was wrong. The copies of the directions issued by JC (SIB)-B and the Taj Authority for cancellation of registration were never served to the petitioner. Also, the cancellation was a non-speaking order.

The counsel cited the decision of the Allahabad High Court in the Videocon D2h Ltd. vs. State of UP and 3 Ors case, wherein on the date fixed for submitting the reply, the order was not passed. Hence, it could not be sustained. If the petitioner did not appear on the next date, the impugned order should not have been passed ex-parte.

It was further stated that Section 5 applied only to the industry, or a person involved in such an operation. However, the petitioner was a coal dealer in the purchasing and selling business, which did not pollute the environment. Therefore, not covered by the direction. Also, since the jurisdiction of the Taj Authority was challenged as having expired, it could not pass any order.

In his argument, the respondent’s counsel submitted that the petitioner did not adhere to the directions issued from time to time under the Act and the Taj authorities. The petitioner failed to maintain the sale register of the coal in detail. It also failed in acquire a no-objection certificate from the Pollution Control Board and other authorities. Additionally, the petitioner did not maintain the sale register, violating the GST Act. The failure to maintain the coal register was violation of the mandate of the Taj authorities to defend the cancellation order.

Justice Agrawal asserted that the Taj Authority was constituted by the Ministry of Environment and Forest, Government of India, in exercise of the power conferred by sub-clause 1 & 3 of Section 3 of the Environment Protection Act. Thus, under Section 5 any authority or officer was bound by the directions issued by the Central government restricted only to the industry.

The Court further held, “If any other enactment is in operation, the Environment Act has an overriding effect, but for punishing and such punishment will be under that Act. Any direction given by the Taj authorities for cancellation of registration must be in accordance with Section 29 read with Rule 21 of the GST Act and Rules. The GST authorities cannot blindly follow the directions of the Taj authorities.”

The judge cited the Agra Coal Suppliers vs. State of UP. Thru' Principal Secry., Instt. Finance & Anr case, wherein the Allahabad High Court had held that in view of the judgment of the Apex Court in the M.C. Mehtra (Taj Trapaziam Matters) vs. Union of India & Another (1997) case, the registration of the coal dealers could not be canceled. The judgment referred only to the ‘industries operating within the Taj Corridor and the pollution resulting therefrom, including the air pollutant, was affecting the quality of life, including that of the Taj Mahal monument.’

Reacting to the action taken by the tax authorities against the coal dealers, the bench observed, “The GST authorities in the State of UP, in the zeal to please the Taj authorities, have issued two letters dated 18.8.2022 and 19.09.2022, the copies of which have been annexed. Annexure Nos.17 & 18 direct the cancelation of the registration of all coal dealers of Agra. This was neither the intent nor the direction by the Taj authorities.”

The Court placed reliance on the decision of the top Court in the Mohinder Singh Gill vs. The Chief Election Commissioner, New Delhi case to disregard the appendix order, filed along with the cancellation order for the first time before the High Court.

The Supreme Court had held that the ‘state authority could not be permitted to supplement fresh reasons by means of an affidavit.’ Therefore, since the respondent’s counsel could not confirm if the appendix order was brought on record at the appellate stage, it held that such an order was of no ‘aid’ to the authorities.

Thus, the High Court bench observed that there was no finding in the cancelation order regarding the books not being maintained by the petitioner. Accordingly, the order for the cancelation of GST registration was quashed. The Court ordered the authorities to reinstate the petitioner's registration certificate immediately with retrospective effect, along with all consequential benefits.