# Drs Wood Products v. State of U.P. & Ors

- **Citation:** (2022) 8 ILRA 169
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-08-05
- **Case number:** Writ C No. 21692 of 2021
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/drs-wood-products-v-state-of-u-p-ors-48734
- **Pages:** 8

## Headnote

A. Civil Law-U.P. Goods and Service Tax
Act, 2017-Sections 29 & 30 -Central Goods
and Service Tax Act 2017-Section 29 &
Central Goods and Services Tax Rules,
2017-Rule 22(1) - Cancellation of GST
registration-validity-
Registration
cancelled on a vague show cause notice
without
any
allegation
or
proposed
evidence against the petitioner-Principles
of
administrative
justice
violatedCancellation of registration erroneous as
the allegations were only to the ground
that tax payer found non-functioning at
the principal place of business-the order
rejecting the application for revocation of
cancellation takes the matter to the height
of arbitrariness as no reasons recordedThe authorities failed to act in the light of
the spirit of the GST Act as it discloses
absence of application of mind-the orders
cannot be sustained as they are contrary
to the mandate of Section 29 and 30 of
the Act as well as the principles of
adjudication
by
the
quasi-judicial
authorities. (Para 1 to 25)

The writ petition is allowed. (E-6)

List of Cases cited:
170 INDIAN LAW REPORTS ALLAHABAD SERIES

## Text

8 All. Drs Wood Products Vs. State of U.P. & Ors.
169
adjourned by the Presiding Officer on the
first occasion for administrative reasons
and on the second event, i.e. today, on
account of his being tested Corona positive
and therefore, it is not possible for the
Presiding Officer to hold the meeting.

However, considering the second
proviso to sub-rule (1) of Rule 458 that
provides for at least 21 days notice to be
given for holding a meeting for the purpose
of consideration of the proposed no
confidence motion, it stands to reason that
adequate time ought to be afforded to the
members of Cooperative Bank to attend that
meeting. Giving of adequate time as provided
in the second proviso aforesaid is necessary
because the members of the Cooperative
Society/Bank can make due arrangements for
attending the meeting. Therefore, the second
proviso
aforesaid
is
required
to
be
compulsorily followed.

14. For all the reasons aforestated, we
do not find any merit in this writ petition, the
writ petition is dismissed with the following
directions:

(i) The respondent no. 2 shall
himself give at least 21 days clear notice of
the meeting to all the members within a week
from today. The notice shall strictly comply
with the provisions of sub-rule (1) and subrule (2) of Rule 458 of the Rules, 1968.

(ii) On the date fixed, the meeting
shall be certainly held either by the
respondent no. 2 i.e. District Magistrate or by
his nominee nominated under Rule 459 of the
Rules, 1968.

15. Learned Additional Chief Standing
counsel shall inform this order in writing to the
respondent no. 2 i.e. District Magistrate,
Ghaziabad within 48 hours for strict compliance.
----------
(2022) 8 ILRA 169
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 05.08.2022

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Writ C No. 21692 of 2021

Drs Wood Products ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Alok Singh, Suyash Agarwal

Counsel for the Respondents:
C.S.C., Digvijay Nath Dubey

A. Civil Law-U.P. Goods and Service Tax
Act, 2017-Sections 29 & 30 -Central Goods
and Service Tax Act 2017-Section 29 &
Central Goods and Services Tax Rules,
2017-Rule 22(1) - Cancellation of GST
registration-validity-
Registration
cancelled on a vague show cause notice
without
any
allegation
or
proposed
evidence against the petitioner-Principles
of
administrative
justice
violatedCancellation of registration erroneous as
the allegations were only to the ground
that tax payer found non-functioning at
the principal place of business-the order
rejecting the application for revocation of
cancellation takes the matter to the height
of arbitrariness as no reasons recordedThe authorities failed to act in the light of
the spirit of the GST Act as it discloses
absence of application of mind-the orders
cannot be sustained as they are contrary
to the mandate of Section 29 and 30 of
the Act as well as the principles of
adjudication
by
the
quasi-judicial
authorities. (Para 1 to 25)

The writ petition is allowed. (E-6)

List of Cases cited:
170 INDIAN LAW REPORTS ALLAHABAD SERIES
1. Oryx Fisheries Pvt Ltd Vs U.O.I. & ors. (2010)
13 SCC 427

2. Commr of Central Excise, Bangalore Vs
Brindavan Beverages (P) Ltd & ors. (2007) 5
SCC 338

3. Apparent Mkt Pvt. Ltd. Vs St. of U.P. ors.
Writ Tax No. 348 of 2021

4. M/s Ansari Cons. Vs Addl Commr CGST
(Appeals ) & ors. Writ Tax No. 626 of 2020

5. M/s S.S. Traders Vs St. of U.P. & ors. Writ
Tax No. 651 of 2021

(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Heard Shri Suyash Agarwal and
Shri Alok Singh, learned counsel for the
petitioner, learned Standing Counsel for
the State and Shri Digvijay Nath Dubey,
learned counsel for respondent no.4.

2. The present petition has been
filed 18.01.2021 whereby the appeal
preferred by the petitioner has been
rejected. The said appeal was preferred
against
the
order
dated
15.07.2020
whereby the application for revocation of
the cancellation of the registration was
rejected.

3. The facts, in brief, are that the
petitioner is a partnership firm carrying
on business of manufacture and trading of
Veneer and was granted the registration
number under CGST Act 2017. It is also
claimed that prior to the enforcement of
the GST, the petitioner was registered
under the UPVAT Act and the CST Act
also.
It
is
also
claimed
that
the
assessments were carried out in respect of
the petitioner establishment under the
VAT Act and the CST Act for the
assessment year 2017-18. The petitioner
claims to be carrying out the business
from the registered place of business as
registered with the GST Authorities and
are paying taxes. A show-cause notice
dated 08.05.2020 was issued to the
petitioner under Rule 22(1) of the GST
Rules whereby it was alleged that on the
basis of the information which has come
to
the
notice
of
the
Assistant
Commissioner
it
appears
that
your
registration is liable to be cancelled for
the following reasons:

"1.
Taxpayer
found
Nonfunctioning/Not Existing at the Principal
Place of Business"

4. Subsequent thereto, an order
came to passed on 22.05.2020 (Annexure
- 12) wherein the following has been
recorded:

"This has reference to your
reply dated 17/05/2020 in response to the
notice to show cause dated 08/05/2020

Whereas no reply to notice to
show cause has been submitted.

The
effective
date
of
cancellation of your registration is
22/05/2020."

5. The petitioner while trying to
upload his E-Way Bill came to know that
the registration of the petitioner - firm has
been cancelled on 08.05.2020, as such, the
petitioner
moved
an
application
for
revocation of the order dated 08.05.2020 in
terms of the provisions contained in
Section 30 of the U.P. GST Act, 2017
(hereinafter referred to as 'the Act'). The
said application specifically stated that the
fact with regard to cancellation came to the
knowledge of the petitioner in the month of
June, 2020. In any case, the said
application was within the time prescribed
under Section 30 of the Act. In response to
8 All. Drs Wood Products Vs. State of U.P. & Ors.
171
the said application filed by the petitioner, a
show-cause notice was again issued on
13.06.2020 stating that the application for
revocation is liable to be rejected for the
following reason:

"firm was properly issued show
cause
notice
vide
ref
number
ZA090520010436Y,
no
satisfactory
explanation was received within prescribed
time."

6. In response to the said show-cause
notice, the petitioner moved an application
seeking 15 days extension of time to give a
reply in view of the marriage of the
daughter of the petitioner scheduled on
24.06.2020. Without considering the said
application, an order came to be passed on
15.07.2020 rejecting the application for
revocation
of
cancellation
of
the
registration on the reasons as recorded in
the show cause notice that no satisfactory
explanation
was
received
within
the
prescribed time. The order is quoted
hereinbelow:

"This has reference to your reply
filed vide ARN AA0906203362399 dated
13/06/2020. The reply has been examined
and same has not been found to be
satisfactory for the following reasons:

1. Any Supporting Document -
Others (Please specify) - firm was properly
issued show cause notice vide ref number
ZA090520010436Y.
no
satisfactory
explanation was received within prescribed
time.

Therefore, your application is
rejected in accordance with the provisions
of the Act."

7. Aggrieved against the said order, an
appeal was filed under Section 107 of the
Act
before
the
Appellate
Authority
constituted under the Act. In the grounds of
appeal, which are on record as Annexure -
17, the petitioner demonstrated by means of
averments that the firm of the petitioner
was running from the premises in question.
During the pendency of the appeal, the
petitioner also filed written submission
before the Appellate Authority in which all
the documents as deemed fit by the
petitioner
were
presented
before
the
Appellate
Authority.
The
Appellate
Authority dismissed the appeal recording
that an inspection was carried out on
20.05.2020 in respect of the premises of the
petitioner and on the site in question, the
committee comprising of three persons did
not find any activity pertaining to the firm
over the property in question. It also
records that the partner of the firm Shri
Arun Jindal was called on phone but he
could not give any clear reply. It was also
recorded that in the said inspection at the
given place of interest, no stocks or
commercial activity was found and the
partners of the firm did not co-operate in
the inspection. It also records that in the
inspection report another firm in the name
of M/s Star Enterprises, 24 Gandhi Nagar,
Sitapur with another GST number was
found working and on the spot, the owner
of the firm Mr. Imran was found and on the
said place the said firm M/s Star
Enterprises was found to be working. The
said report, which was relied upon, also
referred to the license from the Forest
Department. It was also recorded that in the
inspection report there was a mention that
over the property bearing Gata No.56,
BKT, Lucknow, the said firm M/s Star
Enterprises had taken the property on lease
from one Shri Arun Jindal and nothing was
found in respect of the petitioner firm over
the property in question. It was also
recorded that even earlier in a search
carried out on 15.05.2018 by SIB, it has
172 INDIAN LAW REPORTS ALLAHABAD SERIES
come to the knowledge that on the place in
question, no activity of manufacturing or
selling was being carried out and no
commercial activities were found and based
upon the said report, he formed an opinion
that the firm was got registered only with a
view to help in evasion of taxation.

8. Learned counsel for the petitioner
has placed on record a show-cause notice
dated 28.05.2021 issued to the petitioner -
firm by the CGST alleging that on the basis
of inspection carried out at the petitioner
premises, goods found in the premises were
stored contrary to the rules and thus, were
liable to be confiscated. He also argues that
on 20.06.2020, the goods of the petitioner
were seized on the ground that the goods
were being carried on the basis of expired
E-Way bill.

9. On the basis of the facts as narrated
above, learned counsel for the petitioner
argues that the show-cause notice is bereft
of any facts on the basis of which the
petitioner was called upon to file a reply.
He argues that the show-cause notice is
meant to put the assessee on guard and to
give a reply in respect of alleged charges
against him, whereas in the present case the
show-cause notice is totally silent with
regard to the averments contained or reply
to be made against the petitioner.

10. Learned counsel for the petitioner
further argues that the show-cause notice
which led to the initial cancellation of the
registration was never served upon the
petitioner and in any case, if the petitioner
had applied for revocation of cancellation
of registration in terms of the mandate of
Section 30 of the Act, it was incumbent
upon the Assessing Authority to have
passed an order considering the larger
mandate of Section 30 of the Act, which
has not been done. He further argues that
the Appellate Authority has erred in
dismissing the appeal on the grounds,
which are totally extraneous to the
proceedings as the inquiry of the year 2018
or inspection report dated 20.03.2020 were
neither the basis of the show-cause notice
nor were ever supplied to the petitioner nor
was the petitioner ever confronted to give
reply and response to the said inquiry. He
further argued that in any event, on the one
hand the allegations against the petitioner
are that no commercial activities were
being carried out at the place of registration
on the other hand the CGST as well as the
UP GST Authorities have alleged shortage
of finished goods and seizure of the goods
on
account
of
expired
E-Way
bill
respectively. He draws my attention to
Section 29 of the Act, which provides for
cancellation of registration and on the
grounds on which the same can be done.

Section 29 of the Act is being quoted
hereinbelow:

"Section 29: Cancellation or
Suspension of Registration.- (1) The
proper officer may, either on his own
motion or on an application filed by the
registered person or by his legal heirs, in
case of death of such person, cancel the
registration, in such manner and within
such period as may be prescribed, having
regard to the circumstances where, -

(a)
the
business
has
been
discontinued, transferred fully for any
reason including death of the proprietor,
amalgamated with other legal entity,
demerged or otherwise disposed of; or

(b) there is any change in the
constitution of the business; or

(c) the taxable person is no
longer liable to be registered under Section
22 or Section 24 or intends to opt out of the
8 All. Drs Wood Products Vs. State of U.P. & Ors.
173
registration voluntarily made under subsection (3) of Section 25:

Provided that during pendency of
the proceedings relating to cancellation of
registration filed by the registered person,
the registration may be suspended for such
period and in such manner as may be
prescribed.

(2) The proper officer may cancel
the registration of a person from such date,
including any retrospective date, as he may
deem fit, where,-

(a) a registered person has
contravened such provisions of the Act or
the rules made thereunder as may be
prescribed; or

(b) a person paying tax under
section 10 has not furnished returns for
three consecutive tax periods; or

(c) any registered person, other
than a person specified in clause (b), has
not furnished returns for a continuous
period of six months; or

(d) any person who has taken
voluntary registration under sub-section (3)
of section 25 has not commenced business
within six months from the date of
registration; or

(e) registration has been obtained
by means of fraud, wilful misstatement or
suppression of facts:

Provided that the proper officer
shall not cancel the registration without
giving the person an opportunity of being
heard:

Provided further that during
pendency of the proceedings relating to
cancellation of registration, the proper
officer may suspend the registration for
such period and in such manner as may be
prescribed.

(3)
The
cancellation
of
registration under this section shall not
affect the liability of the person to pay tax
and other dues under this Act or to
discharge any obligation under this Act or
the rules made thereunder for any period
prior to the date of cancellation whether or
not such tax and other dues are determined
before or after the date of cancellation.

(4)
The
cancellation
of
registration under the Central Goods and
Service Tax Act, 2017 (12 of 2017) shall be
deemed to be a cancellation of registration
under this Act.

(5)
Every
registered
person
whose registration is cancelled shall pay an
amount, by way of debit in the electronic
credit ledger or electronic cash ledger,
equivalent to the credit of input tax in
respect of inputs held in stock and inputs
contained in semi- finished or finished
goods held in stock or capital goods or
plant
and
machinery
on
the
day
immediately preceding the date of such
cancellation or the output tax payable on
such goods, whichever is higher, calculated
in such manner as may be prescribed:

Provided that in case of capital
goods or plant and machinery, the taxable
person shall pay an amount equal to the
input tax credit taken on the said capital
goods or plant and machinery, reduced by
such
percentage
points
as
may
be
prescribed or the tax on the transaction
value of such capital goods or plant and
machinery under section 15, whichever is
higher.

(6) The amount payable under
sub-section (5) shall be calculated in such
manner as may be prescribed."

11. Learned counsel for the petitioner
argues that none of the grounds as
contained in Section 29 of the Act were
alleged or established against the petitioner.
He has drawn my attention to the judgment
of the Hon'ble Supreme Court in the case of
Oryx Fisheries Private Limited v. Union
of India and Ors. - (2010) 13 SCC 427
174 INDIAN LAW REPORTS ALLAHABAD SERIES
wherein the requirements and reasoning of
a show-cause notice have been explained in
detail by the Hon'ble Supreme Court.

12. He next relies upon the judgment
of the Hon'ble Supreme Court in the case of
Commissioner
of
Central
Excise,
Bangalore v. Brindavan Beverages (P)
Ltd. and Ors. - (2007) 5 SCC 338 wherein
the Hon'ble Supreme court has noticed the
manner in which the show-cause notice
was passed.

13. He also relies upon three
judgments of this Court i.e Writ Tax
No.348 of 2021 (Apparent Marketing
Private Limited v. State of U.P. & Ors.)
decided on 05.03.2022, Writ Tax No.626 of
2020
(M/s
Ansari
Construction
v.
Additional Commissioner Central Goods
and Services Tax (Appeals) and Ors.)
decided on 24.11.2020 & Writ Tax No.651
of 2021 (M/s S.S. Traders v. State of U.P.
& Ors.) decided on 02.11.2021, wherein
almost identical issues were considered by
the High Court.

14. In the light of the said learned
counsel for the petitioner argues that the
petition is liable to be allowed.

15. Learned Standing Counsel on the
other hand justifies the order on the ground
that on an investigation being carried out
on 20.03.2020 by a committee at the main
place of business of the firm neither any
business activity was found nor any stock
of goods or any employee was found and
on the contrary, the unit of another firm
M/s Star Enterprises was found working on
the same declared business site. No books
of account were available at the time of
investigation at the place of business. It is
further argued that when the partner of the
firm was trying to be contacted on
telephone, he did not co-operate in the
investigation and despite notice, no books
of account/entries were produced before the
Investigating Officer. He further argues that
the petitioner did not even submit a reply to
the show-cause notice and thus, justifies the
impugned order and states that the petition
is liable to be dismissed.

16. Shri Digvijay Nath Dubey,
learned counsel appearing for respondent
no.4
argues
that
on
the
date
of
investigation, no goods were found and
accordingly, the registration was cancelled
and it appears that after the cancellation of
the registration, some goods might have
been placed by the petitioner at the place.
He argues that in terms of the show-cause
notice issued by the DGGI as contained on
Page - 141 and 142, on 03.12.2020 a search
was carried out and a panchnama of the
goods were prepared, which indicated
various goods as were seized in terms of
the said panchnama, which is recorded as
RUD - 1 to the show-cause notice dated
28.05.2021, to this he argues that after the
cancellation
of
the
registration,
the
petitioner might have kept the goods there.

17. In the light of the submissions
made at the Bar, this Court is to consider
whether the action taken against the
petitioner in respect of cancellation satisfies
the test of the requirement of Section 29 of
the Act or not?

18. A perusal of the show-cause
notice at the first instance, clearly depicts
the opaqueness of the allegations levelled
against the petitioner, which were only to
the ground that ''tax payer found nonfunctioning/non-existing at the principal
place of business'. The said show-cause
notice did not propose to rely upon any
report or any inquiry conducted to form the
8 All. Drs Wood Products Vs. State of U.P. & Ors.
175
opinion and on what basis was the
allegation levelled that the tax payer was
found non-functioning; it does not indicate
as to when the inspection was carried. A
vague show-cause notice without any
allegation or proposed evidence against the
petitioner, clearly is violative of principles
of administrative justice. Cancellation of
registration is a serious consequence
affecting the fundamental rights of carrying
business and in a casual manner in which
the show-cause notice has been issued
clearly demonstrates the need for the State
to give the quasi-adjudicatory function to
persons who have judicially trained mind,
which on the face of it absent in the present
case. The order of cancellation of the
registration on the ground that no reply was
given is equally lacking in terms of a quasijudicial fervor as the same does not contain
any reasoning whatsoever. The show-cause
notice issued after the petitioner had filed
an application for revoking the cancellation
of registration also smacks of lack of
judicial training by the quasi-adjudicatory
authorities under the GST Act as it merely
shows that no satisfactory explanation was
received within the prescribed time.

19. The order rejecting the application
for revocation of cancellation of registration
takes the matter to the height of arbitrariness
inasmuch as no reasons are recorded as to
why the request for revocation of cancellation
of registration could not be accepted and
discloses absence of application of mind with
regard to the averments contained in the
application filed by the petitioner for
revocation of cancellation of registration. It is
also not clear as to why the request of the
petitioner to adjourn the matter because of the
marriage of his daughter was not even
considered prior to passing of the rejection
order dated 15.07.2020.

20. The petitioner in the ground of
appeal and in the written argument filed in
support of the appeal had extensively stated
and produced evidence to support and
contend that the commercial activity was
being carried out by the petitioner,
however, the same have not been touched
upon by the Appellate Authority while
deciding
the
appeal.
The
Appellate
Authority has gone on a further tangent by
placing reliance upon a report of the year
2018, which was neither confronted to the
petitioner nor was ever part of the record
based upon which the orders have been
passed. This case clearly highlights the
manner
in
which
the
quasi-judicial
authorities and the appellate authorities are
working under the GST Act. The manner of
disposal as is present in the present case
can neither be appreciated nor accepted.

21. I have no hesitation in recording
that the said authorities while passing the
order impugned have miserably failed to
act in the light of the spirit of the GST Act.
The stand of the Central Government
before this Court is equally not appreciable
as on the one hand they are alleging that
excess goods were found for which the
petitioner is liable to pay duty and on the
other hand there is justification to the order
passed and impugned in the present
petition.

22. Finding the orders contrary to the
mandate of Section 29 and 30 of the Act as
well as the principles of adjudication by the
quasi-judicial
authorities,
the
orders
impugned dated 18.01.2021 (Annexure -
19) and 15.07.2020 (Annexure - 16) cannot
be sustained and are set aside.

23. The registration of the petitioner
shall be renewed forthwith.
176 INDIAN LAW REPORTS ALLAHABAD SERIES

24. In the present case, the arbitrary
exercise of power cancelling the registration
in the manner in which it has been done has
not only adversely affected the petitioner, but
has also adversely affected the revenues that
could have flown to the coffers of GST in
case the petitioner was permitted to carry out
the commercial activities. The actions are
clearly not in consonance with the ease of
doing business, which is being promoted at
all levels. For the manner in which the
petitioner
has
been
harassed
since
20.05.2020, the State Government is liable to
pay a cost of Rs.50,000/- to the petitioner.
The said cost of Rs.50,000/- shall be paid to
the petitioner within a period of two months,
failing with the petitioner shall be entitled to
file a contempt petition.

25. The writ petition is allowed in
above terms.
----------
(2022) 8 ILRA 176
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 29.07.2022

BEFORE

THE HON'BLE MANISH KUMAR, J.

Writ C No. 1000840 of 2015
along with
other connected cases

The Oriental Insurance Company Ltd.
 ...Petitioner
Versus
Abhishek Kumar & Ors. ...Respondents

Counsel for the Petitioner:
Vaibhav Raj

Counsel for the Respondents:
C.S.C., Naresh Singh Chauhan

A. Civil Law-Insurance Claim-Clause 4 &
22(b) of the Agreement-rejection of claim
on the ground of non-furnishing of the
computerized khatauni being as required
under
Clause
4
of
the
agreementgenuineness of the khatauni on the record
as provided by the private respondent
under clause 2 of the agreement had
never been disputed-thus, the claim shall
not be rejected or repudiated on mere
technicalities-non-furnishing
of
computerized khatauni alone will not
come in the way of the claim of farmers
claimants, as this would be against the
spirit of beneficial agreement-rejection of
claim on the said ground is wholly illegalhaving
regard
to
the
facts
and
circumstances of the case as well as the
resultant delay would quantify the amount
of penalty at Rupees 75000/- and to this
extent, the judgments are modified.(Para
1 to 21)

The petitions are partly allowed. (E-6)

List of Cases cited:
1. O.I.C Ltd. Thru Div. Mgr. Vs Chote Singh &
ors. WP No. 20736 of (M/S) of 2018

2. O.I.C Ltd. Thru Div. Mgr. VsSmt. Ramkali
@Rajkumari & ors. 5324 of (M/S) 2015

3. Gurmel Singh Vs Branch Mgr., National Ins.
Co. Ltd. (Civil Appeal No. 4071 of 2022

(Delivered by Hon'ble Manish Kumar, J.)

1. Heard learned counsel for the
petitioner and learned counsel for the
private respondents.

2. All the above-noted writ petitions
involve
common
questions
for
consideration raised by the petitioner
praying for rejection of the claim of the
claimants on the ground their nonfurnishing of the computerized khatauni
being as required under Clause 4 of the
agreement and about imposition of penalty
upon the petitioner under Clause 22(b) of
the agreement. Hence, all the above said