Bombay High Court seeks response from Attorney General and Advocate General on GST Rules amendment

Bombay High Court seeks response from Attorney General and Advocate General on GST Rules amendment

Directs them to file their reply within two weeks

The Bombay High Court has issued a notice to the Attorney General of India KK Venugopal and Advocate General of Maharashtra Ashutosh Kumbhakoni in a petition challenging the amendment to the Goods and Services Tax (GST) Rules, 2017. The amendment deprives the assessee of the opportunity to be heard before suspending the GST registration.

A bench of Justice KR Shriram and Justice AS Doctor noted that the plea challenged amendments to both the Central Goods and Services Tax (CGST) Rules and the Maharashtra Goods and Services Tax (MGST) Rules.

The petitioner, SAT Industries Ltd., approached the court after a show cause notice was issued to it for cancellation of registration. The notice stated, "Please note that your registration stands suspended with effect from 08 August 2022."

The petitioner contended that the order in the show cause notice was issued without providing any opportunity for a hearing. The petitioner challenged the constitutional validity of the amendment, which omitted the words, "after affording the person a reasonable opportunity of being heard."

Rule 21A states that the proper tax officer could cancel a registration of a party if there were differences or anomalies between GSTs. If the differences could be explained, the officer was authorized to suspend the registration. However, by way of the 12 December 2020 notification, the provision of granting a reasonable opportunity to hear the assessee before suspending the registration was omitted.

Sub-Rule 2 now reads, "Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under Section 29 or under Rule 21, he may suspend the registration with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under Rule 22."

The plea filed through advocate Nikhil Rungta stated that not hearing the petitioner before suspending the license was in absolute violation of the fundamental right of a person under the Constitution of India.

Senior advocate Vineet Kothari and advocate Mehul Kothari argued that the omission of the phrase went against the principles of natural justice because the implication of such a suspension was drastic.

They submitted, "A person whose registration has been suspended cannot make any taxable supply during the period of suspension and cannot be granted any refund during the period of suspension."

The bench has granted ad-interim relief to the petitioner and stayed the effect and operation of the show cause notice. The registration certificate of the petitioner under the GST Act has been suspended.

The plea is listed for a hearing on October 10.