# M/S K.K.R Industries v. U.O.I. & Ors

- **Citation:** (2024) 3 ILRA 1814
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-11-21
- **Case number:** Writ Tax No. 1307 of 2023
- **Bench:** Ajay Bhanot
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-k-k-r-industries-v-u-o-i-ors-50942
- **Pages:** 7

## Headnote

II. The order of cancellation of
GST registration virtually compels the
petitioner to shut down his business.

III. The order is non-speaking and
reflects non application of mind despite
visit the petitioner with severe penalties.

## Text

1814 INDIAN LAW REPORTS ALLAHABAD SERIES
writ petitioner we find it rather necessary
to enhance the amount of costs.

7. Upon our having made these
observations, learned counsel for the
petitioners has attempted to submit that the
questions of law in this case, as regards the
operation and effect of Section 129 of
Telangana Goods and Services Tax Act,
2017 and violation by the writ petitioner,
may be kept open. The submissions sought
to be made do not give rise to even a
question of fact what to say of a question of
law. As noticed hereinabove, on the facts of
this case, it has precisely been found that
there was no intent on the part of the writ
petitioner to evade tax and rather, the
goods in question could not be taken to the
destination within time for the reasons
beyond the control of the writ petitioner.
When the undeniable facts, including the
traffic blockage due to agitation, are taken
into consideration, the State alone remains
responsible for not providing smooth
passage of traffic."

8. Upon perusal of the judgments, the
principle that emerges is that presence of
mens rea for evasion of tax is a sine qua
non
for
imposition
of
penalty.
A
typographical error in the e-way bill
without any further material to substantiate
the intention to evade tax should not and
cannot lead to imposition of penalty. In the
case of M/s. Varun Beverages Limited
(supra) there was a typographical error in
the e-way bill of 4 letters (HR ? 73). In the
present case, instead of ?0401?, ?2224?
was incorrectly entered into the e-way bill
which clearly appears to be a typographical
error. In certain cases where lapses by the
dealers are major, it may be deemed that
there is an intention to evade tax but not so
in every case. Typically when the error is a
minor error of the nature found in this
particular case, I am of the view that
imposition of penalty under Section 129 of
the Act is without jurisdiction and illegal in
law.

9. In light of the above findings, the
impugned orders dated 17.6.2022 and
1.2.2021 are quashed and set-aside. The
consequential reliefs to be provided to the
petitioner within the next four weeks.

10. The writ petition is allowed
accordingly.
----------
(2024) 3 ILRA 1814
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 21.11.2023

BEFORE

THE HON'BLE AJAY BHANOT, J.

Writ Tax No. 1307 of 2023

M/S K.K.R Industries ...Petitioner
Versus
U.O.I. & Ors. ...Respondents

Counsel for the Petitioner:
Vishwas Pandey, Durga Shanker Shukla, Mahesh
Dwivedi

Counsel for the Respondent:
A.S.G.I., C.S.C., Naveen Chandra Gupta

The Goods and Services Tax (GST) Act,
2017- petitioner is engaged in the business of
sale of scrap items- obtained a GST registration
under the GST Act- show cause notice was
issued to the petitioner proposing to cancel the
registration- as the principal place of business
was not found/available at the time of field visitpetitioner could not tender his reply for various
reasons beyond his control- impugned order
cancelling the GST registration of the petitioner
is not speaking order- authorities have adopted
3 All. M/S K.K.R Industries Vs. U.O.I. & Ors.
1815
procedure not known to law-impugned order
and show cause notice set aside.

W.P. allowed. (E-9)

Cases cited:

1. M/s Chandra Sain, Sharda Nagar, Lucknow
Thru. Its Proprietor Ms. Chandra Sain v. U.O.I .
Thru. Secy. Ministry of Finance, New Delhi and 5
others, Writ Tax No.147 of 2022

2. M/s Viraj Polymers Private Ltd. v. State of
U.P. and 3 others, Writ Tax No.300 of 2022

3. Drs. Wood Products Lucknow Thru. Its
Partner Sh. Arun Jindal v. State of U.P. Thru.
Prin. Secy. Tax and Registration Lko. And
others, Writ-C No.21692 of 2021

4. Apparent Marketing Private Limited v. State
of U.P. and 3 others, Writ Tax No.348 of 2021

(Delivered by Hon'ble Hon'ble Ajay
Bhanot, J.)

1. Heard Shri Vishwas Pandey,
learned counsel and Shri Mahesh Dwivedi,
learned counsel for the petitioner, Shri
Naveen Chandra Gupta, learned Central
Counsel for the respondent Nos.1 and 2Union of India and Shri Rishi Kumar,
learned Additional Chief Standing Counsel
for the State.

2. The petitioner in the writ petition is
aggrieved by the impugned order ref.
No.ZA090722077658X dated 13.07.2022
which cancels the GST registration under
the GST Act.

3. The appeal of the petitioner has
been rejected on grounds of limitation by
the
impugned
order
ref.No.ZD091023027190Y
dated
06.10.2023 passed by the respondent No.4.

4. The petitioner is also aggrieved by
the
show
cause
notice
ARNZA090622139048H dated 20.06.2022
passed by the respondent No.5.

5. Shri Vishwas Pandey, learned
counsel and Shri Mahesh Dwivedi, learned
counsel for the petitioner submit that :

I. The action of the authorities
cancelling the GST registration of the
petitioner is arbitrary and illegal.

II. The order of cancellation of
GST registration virtually compels the
petitioner to shut down his business.

III. The order is non-speaking and
reflects non application of mind despite
visit the petitioner with severe penalties.

6. Shri Rishi Kumar, learned
Additional Chief Standing Counsel submits
that :

I. The petitioner failed to submit
a reply to the show cause notice. Hence, no
speaking order is required.

II. The petitioner can continue his
business only in accordance with law and
cannot
complain
if
the
registration
certificate has been cancelled in the manner
aforesaid.

7. Heard learned counsel for the
parties.

8. The petitioner is engaged in the
business of sale of scrap items. He has
obtained a GST registration under the GST
Act. The show cause notice was issued to
the petitioner proposing to cancel the
registration
of
the
petitioner
dated
20.06.2023. The recitals in the show cause
notice disclosed that the GST registration
1816 INDIAN LAW REPORTS ALLAHABAD SERIES
of the petitioner was liable to be cancelled
as the principal place of business was not
found/available at the time of field visit.
Admittedly, the petitioner could not tender
his reply to the show cause notice for
various reasons beyond his control.

9. The show cause notice is vague and
lacks material particulars. The time and
place of the field visit are not disclosed in
the show cause notice nor the details of the
officials who allegedly conducted the visit
have been provided therein. The lack of
material particulars in the show cause
notice
vitiates
the
same
and
the
proceedings were liable to be dropped. The
report of the officials who had allegedly
visited the site of business has not been
appended to the show cause notice nor was
supplied to the petitioner.

10. Further, the petitioner was
directed to appear for tendering his reply to
the show cause notice dated 20.06.2022.
Though the seven days time was granted
for the reply, the matter was fixed before
the authorities on 22.06.2022.

11. The time period is too short and is
not sufficient for any noticee to tender an
effective and complete defence of his case.
On both these grounds the show cause
notice is vitiated and the proceedings in
pursuance thereof are also liable to be set
aside
on
this
ground
alone.
The
cancellation order dated 13.07.2022 is a
non speaking order. It does not reflect any
application of mind. Both the grounds go to
the route of the jurisdiction of the
authorities.

12. The narrative shall now be
fortified by good authorities in point. The
issue has been settled by authoritative
pronouncements of this Court. Pankaj
Bhatia, J. in M/s Chandra Sain, Sharda
Nagar, Lucknow Thru. Its Proprietor
Ms. Chandra Sain v. U.O.I . Thru. Secy.
Ministry of Finance, New Delhi and 5
others1 while delineating the duties of the
noticing authority and process to be
followed prior to cancellation of a licence
and also the consequences of such
cancellation held as under:

"6. Learned counsel for the
petitioner argues that although no fault can
be
found
with
the
appellate
order
dismissing
the
appeal
as
Aappellate
Authority does not have the power to
condone the delay in terms of the scheme
of the Act, however, he argues that the
order cancelling the registration is without
application of mind; he draws my attention
to the impugned order dated 13.02.2020,
which does not disclose any application of
mind. He, thus, argues that the quasi
judicial order which has an adverse effect
on the right of the petitioner to run business
as guaranteed under Article 19 of the
Constitution of India, the same has been
done without any application of mind
which is neither the intent of the Act nor
can it be held to be in compliance of the
mandate of Article 14 of the Constitution of
India. He further argues that as the appeal
has not been decided on merit, the doctrine
of merger will have no application and it is
only the order dated 13.02.2020 which
affects the petitioner and as the same is
devoid of any reasons, the same can be
challenged before this Court as decided by
the Hon'ble Supreme Court in the case of
Whirlpool Corporation v. Registrar of
Trademarks, Mumbai and Ors.

7. He further places reliance on
the judgment of this Court in the case of
Om Prakash Mishra v. State of U.P. &
Ors.; Writ Tax No.100 of 2022 decided on
06.09.2022
wherein
this
Court
had
3 All. M/S K.K.R Industries Vs. U.O.I. & Ors.
1817
recorded that every administrative authority
or a quasi judicial authority should
necessarily indicate reasons as reasons are
heart
and
soul
of
any
judicial
or
administrative order.

8. In the present case from the
perusal of the order dated 13.02.2020,
clearly there is no reason ascribed to take
such a harsh action of cancellation of
registration. In view of the order being
without any application of mind, the same
does not satisfy the test of Article 14 of the
Constitution
of
India,
as
such,
the
impugned
order
dated
13.02.2020
(Annexure - 2) is set aside. The petition is
accordingly allowed."

13. The said judgement was followed
in M/s Viraj Polymers Private Ltd. v.
State of U.P. and 3 others2.

14. Similarly the consequences of a
vague show cause notice were also held by
this Court in Drs. Wood Products
Lucknow Thru. Its Partner Sh. Arun
Jindal v. State of U.P. Thru. Prin. Secy.
Tax and Registration Lko. And others3
by holding as under:

"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
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.

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
1818 INDIAN LAW REPORTS ALLAHABAD SERIES
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."

15.

This
Court
in
Apparent
Marketing Private Limited v. State of
U.P. and 3 others4 had occasioned to
consider the consequences of cancellation
of registration and the manner in which the
authorities are liable to proceed in such
matter. S.D.Singh, J. speaking for this
Court held as under:

"12.
Having
heard
learned
counsel for the parties and having perused
the record, in the first place, cancellation of
registration has serious consequences. It
takes away the fundamental right of a
citizen etc. to engage in a lawful business
activity. In the present case, undisputedly,
the registration claimed by the assessee had
been granted by the respondent authority.
Therefore, a presumption does exist as to
such registration having been granted upon
due verification of necessary facts. If the
respondent
proposed
to
cancel
the
registration thus granted, a heavy burden
lay on the respondent authority to establish
the existence of facts as may allow for such
cancellation of registration. Section 29(2)
of the Act reads as below :

"Section 29. Cancellation of
suspension of registration

(1) ...

(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 there under 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, willful 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.]"

13. Therefore, the registration
once granted could be cancelled only if one
of the five statutory conditions was found
present. Per se, no registration may be
cancelled by merely describing the firm
that had obtained it, was "bogus". The word
"bogus" has not been used by the statute.
The only contingency to which such
expression may
relate
may
be
one
appearing under Clauses (c) and (d) of
Section 29(2) of the Act being where a
registered firm does not commence its
business
within
six
months
of
its
registration. Other than that, the term
"bogus" may also refer to a satisfaction
contemplated by Section 29(2)(c) of the
Act where registration may be cancelled if
the registered firm has not furnished its
return for continuous period of six months.
3 All. M/S K.K.R Industries Vs. U.O.I. & Ors.
1819
Those conditions have not been shown to
exist in this case.

14. Yet, in case the authority
wanted to cancel the existing registration, it
ought to have mentioned (in the show cause
notice), if it proposed to cancel the
registration
for
violation
of
Section
29(2)(c) of the Act or for violation of
Section 29(2)(d) of the Act. It cannot be a
matter of contemplation or option either
with the authority or the assessee to find
out for itself by any guesswork or
exploratory exercise, if the case fell in any
of the conditions of Section 29(2) of the
Act.

15. Registration having been
granted earlier, the obligation existed on
the
authority
to
specify
the
exact
reason/charge on which it proposed to
cancel the registration. In the present case,
unless the respondent authority had first
specified the reason why it proposed to
cancel the registration and unless the
authority had specified the reason why it
was attempting to treat the assessee firm
"bogus" i.e. whether reference was being
made to Section 29(2)(c) or Section
29(2)(d) of the Act - by specifically stating
the facts as may give rise to that charge and
unless the supporting material giving rise to
that charge had been referred to in that
notice, the notice itself remained defective
in material aspect.

16.
Though
the
notice
for
cancellation of registration may not be
placed on a high pedestal of a jurisdictional
notice, at the same time, unless the
essential ingredients necessary for issuance
of such notice had been specified therein at
the initial stage itself, the authorities cannot
be permitted to have margin or option to
specify and/or improve the charge later.

17. In the present case, by merely
describing the assessee firm "bogus", the
respondent authority did not make known
to the assessee the exact charge that was
being
levelled
against
the
assessee.
Correspondingly, the respondent authority
deprived the assessee of the necessary
opportunity to rebut the charge.

18. In view of the discussion
made above, the charge levelled in the
notice dated 22.07.2020 and as was
reiterated in the order dated 13.08.2020 and
the further notice dated 21.08.2020 are
wholly, vague. Effectively, it prevented the
assessee to rebut the same. The statute
contemplates issuance of the notice in
specified
circumstances
for
specific
grounds. Those could not be diluted or
muddled or made vague by describing the
assessee firm as "bogus". In absence of any
specific charge, the respondent authority
could not be permitted to proceed to cancel
the assessee's registration. Though it may
remain open to the Assessing Authority to
issue a fresh notice with exact charge
specification, the proceedings arising from
the impugned notice is inherently defective.

16. The judgments of this Court are
squarely applicable to the facts of this case.
This Court finds that the show cause notice
dated
20.06.2022
was
vague
and
unsustainable in law.

17. The order dated 13.07.2022
cancelling the GST registration of the
petitioner is not speaking order which
reflects non application of mind by the
authorities. The authorities have adopted
procedure not known to law while
cancelling the GST registration of the
petitioner. Action of the authorities is not
sustainable in law.
1820 INDIAN LAW REPORTS ALLAHABAD SERIES

18. The show cause notice dated
20.06.2022 passed by the respondent No.5
is vague.

19. The order dated 13.07.2022
passed by the respondent No.3 and the
order dated 06.10.2023 passed by the
respondent No.4 as well as the show cause
notice dated 20.06.2022 passed by the
respondent No.5 are liable to be quashed
and are quashed.

20. The writ petition is allowed.

21. It is open to the authorities to
proceed afresh against the petitioner in
accordance with law.
----------
(2024) 3 ILRA 1820
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 01.02.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.

Writ Tax No. 1544 of 2022

M/s K.J. Entp., Agra ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Pranjal Shukla

Counsel for the Respondent:
Sri Ravi Shankar Pandey, Addl. C.S.C.

The Uttar Pradesh Central Goods &
Services Tax Act, 2017 - Sections 74 &
75(4) - Assessment and penalty proceedings -
denial of personal hearing - statutory mandate
of opportunity of hearing - interpretation of the
word "or" in Section 75(4) - opportunity of
hearing
mandatory
either
on
request
of
assessee
or
where
adverse
order
is
contemplated - no personal hearing granted
before passing adverse order imposing tax,
interest and penalty - gross violation of
principles of natural justice -procedural illegality
- availability of alternative remedy not a bar
where order passed in breach of natural justice
- impugned assessment and appellate orders
unsustainable - orders quashed - matter
remanded with direction to grant personal
hearing and pass reasoned order in accordance
with law.

Writ petition allowed. (E-9)

Cases Cited:

1. Commissioner of Sales Tax, Uttar Pradesh v.
The Modi Sugar Mills Ltd., MANU/SC/0276/1960
(Supreme Court).
Bharat
Mint
and
Allied
Chemicals
v.
Commissioner, Commercial Tax and Others,
2022 SCC OnLine All 1088 (Allahabad High
Court - Division Bench).

2. Mohini Traders v. State of U.P. and Others,
MANU/UP/2440/2023 (Allahabad High Court -
Division Bench).

3. M/s Primeone Work Force Pvt. Ltd. v. Union
of India, 2024:AHC-LKO:3533-DB (Allahabad
High Court - Division Bench).

4. Dharampal Satyapal Limited v. Deputy
Commissioner of Central Excise, Guwahati and
Others, (2015) 8 SCC 519 (Supreme Court).

(Delivered by Hon'ble Shekhar B. Saraf, J.)

1. Heard counsel appearing on behalf
of the parties.

2. This is a writ petition under Article
226 of the Constitution of India wherein the
petitioner M/S K.J. Enterprises is aggrieved
by the order dated September 26, 2022,
passed by the Additional Commissioner,
Grade - 2, (Appeals - 1st), Commercial
Tax, Agra (hereinafter referred to as the
'Respondent
No.
2').