Neha Enterprise vs State Of Gujarat

C/SCA/20505/2022 ORDER DATED: 19/01/2023

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 20505 of 2022

========================================================== NEHA ENTERPRISE Versus STATE OF GUJARAT ========================================================== Appearance: MR MAULIK NANAVATI ASSISTED BY MS MANVI DAMLE FOR NANAVATI & CO.(7105) for the Petitioner(s) No. 1 MS POOJA ASHAR, ASST. GOVERNMENT PLEADER for the Respondent(s) No. 1,2,3 ==========================================================

CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE SANDEEP N. BHATT

Date : 19/01/2023

ORAL ORDER

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. The petitioner is challenging the

proceedings initiated by way of show cause

notice dated 10.05.2022 issued by the

department, which culminated into

cancelling the registration of the

petitioner firm under the provisions of the

Central Goods and Services Tax Act, 2017

('the CGST Act' hereinafter).

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2. Brief facts leading to the present

petition are as follow:

2.1 The petitioner is registered under the

Gujarat Goods and Service Tax Act, 2017

('the GGST Act' hereinafter) having the

Goods and Service Tax Identification

No.24DHWPK1820G1ZA. The show cause notice

dated 10.05.2022 came to be issued by the

department in Form GST REG-17/31. This is

in exercise of the powers under Section 29

of the CGST Act read with Rule 22(1) of the

Central Goods and Service Tax Rules, 2017

('the CGST Rules' hereinafter). The show

cause notice had not been sent to the

petitioner physically nor any notice has

been received by the petitioner by post or

at his registered address.

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2.2 Another grievance on the part of the

petitioner is that no other document has

been uploaded except the single page

notice. For any allegation to be

substantiated no reason is also reflected

for the petitioner to meet with the

challenge. The petitioner was asked to

appear in person failing which on ex-parte

basis this was to be decided on the basis

of the available record. No time for

personal hearing was granted and the show

cause notice did not mentioned the name and

designation of the person issuing the

notice before whom and what time and place

the petitioner needed to appear.

2.3 Although, it was extremely difficult

for the petitioner, it is still attempted

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to upload on a portal a short reply stating

that the notice was unintelligible for any

prudent person to reply.

2.4 On 25.05.2022, the State Tax Officer,

Ghatak 23(Ahmedabad) passed an order

cancelling the registration of the

petitioner firm. The order of cancellation

did not record any reasons for cancellation

of the GST registration and mentioned that

the order of cancellation is as per the

attached order. The order did not assign

any particular reason for cancellation.

2.5 An application was preferred on

15.06.2022 seeking revocation of

cancellation of registration. The

department on 01.08.2022 rejected the

application of the petitioner.

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2.6 Aggrieved petitioner preferred the

present petitioner with the following

prayers:

"6...

(a) To issue a writ in the nature of certiorari and or any other appropriate writs, order or direction for calling of records of proceedings initiated pursuant to show cause notice dated 10.05.2022 and after perusing the same be pleased to quash and set aside show cause notice dated 10.05.2022 and order dated 25.05.2022 passed thereon by State Tax Officer, Ghatak 23, Ahmedabad, and be further pleased to direct restoration of registration bearing number 24DHWPK1820G1ZA;

(b) To pass an exparte ad interim order stating the operation, execution and implementation of the order dated 25.05.2022 bearing reference no.ZA240522131719M passed by State Tax Officer, Ghatak 23, Ahmedabad, pending the hearing and final disposal of present petition, and

(c) Grant such further and other interim reliefs, as this Hon'ble Court may deem fit and proper in the present nature and circumstances of the case."

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3. This Court issued the notice on

12.10.2022 to the respondent authority.

4. Affidavit-in-reply is filed by the

State Tax Officer, Unit-23 denying all

allegations.

4.1 It is contended that the spot

verification at the principal place of

business was conducted on 07.05.2022, the

same was found closed and non-functioning.

The petitioner was contacted on his

registered mobile No.9913883352, however,

he could not be contacted as his number was

switched off. He also did not support the

on-going investigation nor had he given any

statement in consonance with the

requirement.

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4.2 He was served with the detailed show

cause notice, which was served through the

RPAD to the principal place of the business

of the petitioner as also through the

Whatsapp on registered mobile phone.

4.3 It is further averred that after the

show cause notice was served, the

petitioner uploaded the online reply along

with the copies of PAN Card, Aadhar Card,

Rent Agreement and photograph of the place

of business. No detailed response against

the transaction was given by the

petitioner. It was noticed during the

course of inspection that the petitioner

was engaged in bogus billing transaction of

total taxable value of Rs.14,98,14,786/-

which is circulated transaction and there

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are no equivalent purchases found against

the sales shown. Since he choose not to

remain present, the order of cancellation

of registration was passed, which was duly

uploaded on the portal along with the auto

generated order.

4.4 It is further contended that he

suppressed the material fact that on

15.06.2022 he preferred an application for

revocation under Section 30 of the Act

against which the detailed query was raised

on portal on 12.07.2022, however,it

provided no document in proof of the

legality of transactions and thus, in

absence of any proof the order of

revocation of order of registration was

passed rejecting the application. The

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petitioner failed to avail the alternative

remedy which is provided to him by way of

an appeal under Section 107 of the GST Act.

5. Affidavit-in-rejoinder was found not

necessary and this Court heard at length

learned advocate, Mr.Nanavati assisted by

the learned advocate, Ms.Manvi Damle and

learned AGP, Ms.Pooja Ashar for the State

of Gujarat.

6. It was much argued by the learned

advocate, Mr.Nanavati that there had been

no uploading of the show cause notice on

the portal moreover, if there was a field

visit there ought to have been uploading of

the photographs along with the document

sent report as required under Rule 25 which

has not been done in the instant case. He

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has also further urged that the petitioner

that there is no certificate obtained of

due service of registered A.D. from the

postal department. The presumption,

according to him, will not be available as

the petitioner has discharged his part of

the duty relying on Section 169 of the GST

Act. He has also taken much exception to

the service through the Whatsapp by urging

that, that is not the mode permissible

under the law. While arguing on Rule 142 it

is urged that the proper officer is

required to serve along with the notice

issued under Sections 52, 73, 74, 76, 122,

123, 124, 125, 127, 129 and 130 summary

thereof electronically informed GST DRC-01.

According to him Rule 22(1) provides that

where proper officer has reason to believe

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that registration of a person is liable to

be cancelled under section 29, he shall

issue a notice to such person in Form GST

REG-17 requiring him to show cause. It is

provided thus: "in case registration has

been obtained by means of fraud, willful

misstatement or suppression" we are

directed to furnish a reply to the show

cause notice."

7. The order of cancellation was passed on

25.05.2022, which refers to the order "as

per the attached order."

8. According to the learned AGP, show

cause notice was issued as everything was

found fraudulent due to technical glitch

the show cause notice was not uploaded,

however, it was sent through the RPAD,

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which is reflected in the record. No appeal

has been filed under Section 107. Reliance

is placed on the decision of the Apex Court

in case of State of Maharashtra and others

vs. Greatship (India) Limited, reported in

2022 LiveLaw (SC) 784. She has also further

relied on paras 9.3 and 14 of Aggarwal

Dying and Printing Works vs. State of

Gujarat. The decision of the Andhra Pradesh

High Court also has been relied upon.

8.1 According to her, the decision of

Andhra Pradesh High Court also will help

cause of the revenue. On the issue of due

service through Whatsapp, she has relied on

the decision of the Apex Court on Sue Moto

in Recognizence for Extension of Limitation

3/20.

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9. With regard to the question of

alternative remedy, the Apex Court in case

of the State of Maharashtra and others vs.

Greatship (India) Limited (supra) has held

that the entertainability of a writ

petition under Article 226 of the

Constitution of India by bypassing the

statutory remedy is not desirable. The

Court has in extenso referred to various

decisions to hold that the question is not

about the maintainability of the writ

petition under Article 226 of the

Constitution of India, but the question is

about entertainability against the order of

assessment by bypassing the statutory

remedy of appeal. There is no valid reason

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Therefore, the Court held that when there

is an alternative remedy available,

judicial prudence demands that the Court

must refrain from exercising its

jurisdiction under the said constitutional

provisions.

10. The petitioner, in the instant case, is

before this Court stating that the factual

aspects in a robust way speak of the

violation of principle of natural justice,

not only the same has been averred, it has

also been demonstrated. Therefore, while

being conscious of the fact that when there

is an alternative remedy available,

ordinarily writ jurisdiction is not to be

entertained. The question is about the very

basis of notice which according to this

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Court is quite hollow and shaky. It is a

cryptic 'one line' notice.

10.1 This notice which has been given

under Section 29 Rule 22(1) of the GST

Rules is required to be uploaded. Every

action under the GST, the State expects the

assessee to upload. Here, on the ground of

the technical glitch could not be uploaded.

For taking the action against the person or

assessee, who is acting against the law

ample powers have been given under the GST

Act to the officers. However, the

procedures which are required to be

followed shall need to be followed in

accordance with law. This Court in

Aggarwal Dying and Printing Works (supra)

has in no uncertain terms deprecated the

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action of the respondent authority in

issuing a cryptic notice, which is either

'one liner' or of 'half a line'. This weak

foundation is made the reason for the

cancellation of registration of the

petitioner.

11. The question was with regard to the

notice, which according to the petitioner,

has not been received through the

registered post. Even if, the court takes

recourse to section 169 of the GST Act,

which is a deeming provision when order,

summons, notice or any communication sent

by the registered post or the speed post,

it can be presumed that after the expiry of

the period when normally such post would

reach, the same must have reached to the

petitioner.

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12. This Court notices that the receipt of

registered post is dated 12.05.2022. The

notice is originally of 10.05.2022, however

posted on 12.05.2022 it may take about

three to four days, seven days is

prescribed under the law for the assessee

to reply from the date of receipt of

notice. This is a notice, which even is

presumed to have reached on 17.05.2022, the

order of cancellation of registration is of

25.05.2022. The acknowledgment receipt of

the post sent through the register A.D.

post is not on record. The respondent has

failed to bring it on the record as the

State has woken up at a belated stage and

the postal department would not retain it

beyond the period of three months. Even if,

it is presumed to have received because the

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same has been sent and the presumption is

provided under Section 169(3) of the GST

Act and also the foundation is too shaky

for this Court to allow the State to build

any structure on it. Therefore, show cause

notice and the order of cancellation of

registration need to be interfered with. We

also need to make a specific mention of

Rule 25, the document of which is forming

the part of the record as the spot visit

which has taken place on 07.05.2022 at the

principal business premise of the

petitioner, which is shown to be closed and

the proprietor not being available, Rule 25

provides for verification to be done of the

business premise in the presence of the

person and the report along with other

documents including the photographs to be

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uploaded in FORM GST-REG 30 on the common

portal within the period of 15 working days

following the date of such verification,

nothing of the showed has happened. In fact

credibility of the petitioner is questioned

on the ground that the business premise has

remained close however, the respondent has

not followed the required procedure so far

as the spot visit is concerned. This

serious lapses or breach of fulfillment of

the provisions also further vindicate the

need of interference on the part of this

Court.

13. As a parting note, it needs to be

mentioned that much was debated on issuance

of this notice through the Whatsapp and

reliance is placed on the decision of the

Apex Court in Suo Motu Petition 3 of 2020,

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we need to make a mentioned that the Court

referred to Whatsapp, telegram, signal,

etc. as the instant messaging services at

the time when the physical delivery of

notices, the post offices, courier company,

etc. could not be visited due to the COVID-

19 lock-down. Moreover, while so permitting

the Court had also directed in addition,

the parties to effect the service of such

document by e-mail on the very date. And

the provision itself is either for the

postal through the speed post or registered

A.D. post and hence, those two modes are to

be required to be served.

14. Here, the service is said to have been

effected through the registered A.D.post in

wake of the glaring circumstances and more

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particularly, extremely weak foundation of

the content of the notice, which this Court

in Aggarwal Dying has not sustained. This

petition deserves to be allowed quashing

and setting aside the subsequent actions of

the authority.

15. In the decision of Aggarwal Dyeing and

Printing Works (supra) this Court after

considering the scheme of Act as well as

the procedure contemplated under the

provisions of the Act for cancellation of

registration has held as under:

"10. Thus, upon appreciation of the scheme of Act, where specific forms have been prescribed at each stage right from registration, cancellation and revocation of cancellation of registration, the same are to be strictly adhered too. At the same time, it is equally important that the Proper Officer empowered under the said Act adheres to the principles of natural justice.

11. At the outset, we notice that it is settled legal

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position of law that reasons are heart and soul of the order and non communication of same itself amounts to denial of reasonable opportunity of hearing, resulting in miscarriage of justice. This Court is bound by the said judgments hereinafter referred to. The necessity of giving reason by a body or authority in support of its decision came for consideration before the Supreme Court in several cases. Initially, the Supreme Court recognized a sort of demarcation between administrative orders and quasi-judicial orders but with the passage of time the distinction between the two got blurred and thinned out and virtually reached a vanishing point in the judgment of the supreme Court in A.K. Kraipak v. Union of India [1970] 1 SCR 457. The Hon'ble Supreme Court vide judgments in the cases of Ravi Yashwant Bhoir v. District Collector, Raigad [2012] 4 SCC 407, Sant Lal Gupta v. Modern Cooperative Group Housing Society Ltd. [2010] 13 SCC 336; Kranti Associates (P) Ltd. vs. Masood Ahmed Khan [2010] 9 SCC 496; Abdul Ghaffar vs. State of Bihar [2008] 3 SCC 258, has expanded the horizon of natural justice and reasons have been treated part of the natural justice. It has gone to the extent in holding that reasons are heart and soul of the order. The absence of reasons renders an order indefensible/unsustainable particularly when it is subject to appeal/revision. It is to be noted that in the case of Kranti Associates (P) Ltd. (supra), the Hon'ble Supreme Court after considering various judgments formulated certain principles which are set out below:

"a.In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

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b. A quasi-judicial authority must record reasons in support of its conclusions.

c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

g. Reasons facilitate the process of judicial review by superior Courts.

h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.

i. Judicial or even quasi-judicial opinions these

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days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.

j. Insistence on reason is a requirement for both judicial accountability and transparency.

k. If a judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or 'rubber-stamp reasons' is not to be equated with a valid decision making process.

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny.

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making the said requirement is now virtually a component to human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553 at 562 para 29 and

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Anya v. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions."

o. In all common law jurisdictions judgment play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".

Thus, the position of law that emerges from the decisions mentioned above, is that assignment of reasons is imperative in nature and the speaking order doctrine mandates assigning the reasons which is the heart and soul of the decision and said reasons must be the result of independent re- appreciation of evidence adduced and documents produced in the case.

12. At this stage, it would be germane to refer to observations made by the Andhra Pradesh High Court in the case of MRF Mazdoor Sangh v. Commissioner of Labour 2014 (3) ALT 265, wherein the matter of cancellation of registration of trade union, it was held that:

"The show cause notice should reflect the jurisdictional facts based on which the final order is proposed to be passed. The person proceeded against would then have an opportunity to show cause that the authority had erroneously assumed existence of a jurisdictional fact and, since the

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essential jurisdictional facts do not exist, the authority does not have jurisdiction to decide the other issues."

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19.. In the result, all the writ applications deserve to be allowed solely on the ground of violation of principles of natural justice and, accordingly, the writ applications are allowed. We quash and set aside the respective show cause notices of all the writ applications, seeking cancellation of registration as well as the consequential respective impugned orders cancelling registration with liberty to the respondent No. 2 to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicants, and to pass appropriate speaking orders on merits. It is needless to mention that it shall be open for the writ applicants to respond to such notices by filing objections / reply with necessary documents, if relied upon. We clarify that we have not gone into merits of the case."

17. Resultantly, following the Coordinate

Bench's decision in case of Aggarwal Dyeing

& Printing Works (supra), this petition is

ALLOWED solely on the ground of violation

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of the principles of natural justice. The

impugned order dated 25.05.2022 bearing

reference No.ZA240522131719M passed by the

respondent No.2 is quashed and set aside

granting liberty to the respondent No.2 to

re-issue the show cause notice dated

10.05.2022 with particular reasons

incorporated with details through its

registered email address on

khatikparash1@gmail.com, parashkhatik7029@gmail.com,

khatikparash9913@gmail.com as well as

through RPAD and thereafter to provide

reasonable opportunity of hearing to the

writ applicant and to pass appropriate

speaking order on merit which shall be done

physically as directed in the very

decision. With the aforesaid, the GST

Registration Number of the applicant stands

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restored forthwith and decide the matter by

following the procedure of law.

18. None of the observations made here will

prejudice the right of either side.

(SONIA GOKANI, J)

(SANDEEP N. BHATT,J) M.M.MIRZA

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