Bombay High Court seeks response from Attorney General, Advocate General in challenge to GST Rules amendment

The Bombay High Court recently issued notice to the Attorney General for India and Advocate General of Maharashtra in a petition challenging the amendment to the Goods and Services Tax Rules of 2017 (GST Rules) which deprives the assessee of the opportunity to be heard before suspending the GST registration [SAT Industries Ltd. v. Union of India & Ors.].A bench of Justices KR Shriram and AS Doctor noted that the plea has challenged amendment to both Central GST and Maharashtra GST rules.In view of this, notice was issued to both the Attorney General KK Venugopal as well as Advocate General Ashutosh Kumbhakoni.The petitioner, SAT Industries Ltd., approached the High Court after a show cause notice was issued to it for cancellation of registration.The notice allegedly stated: “Please note that your registration stands suspended with effect from 08/08/2022”.The petitioner contended that the order in the show cause notice had been issued without affording any opportunity of hearing to the petitioner. The petitioner, therefore, moved the Court challenging the constitutional validity of the amendment to sub-rule 2 of Rule 21A of the Central GST Rules 2017 which omitted the words "after affording the said person a reasonable opportunity of being heard".Rule 21A states that the proper tax officer could cancel a registration of a party if there are differences or anomalies between GSTs. Till the differences could be explained the officer is authorised suspend the registration.However, by way of a notification dated December 12, 2020, the provision of granting reasonable opportunity to hear the assessee before suspending the registration was omitted.The 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,[ after affording the said person a reasonable opportunity of being heard,] suspend the registration of such person 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 Nikhil Rungta stated that not hearing the petitioner before suspending the license was in absolute violation of fundamental rights under Article 19(1)(g) of the Constitution of India.Senior Advocate Vineet Kothari with Advocate Mehul Kothari, argued that the omission of the phrase went against the principles of natural justice because implication of such a suspension is drastic.“A registered person whose registration has been suspended cannot make any taxable supply during the period of suspension and shall not be granted any refund during the period of suspension,” he submitted..Additional government pleader Jyoti Chavan for State accepted notice on behalf of the Advocate GeneralThe authorities were directed to file their responses within 2 weeks and the plea was listed for hearing on October 10.The Bench granted ad-interim relief to the petitioner and stayed the effect and operation of the show cause notice by which the registration certificate of the petitioner under the GST Act has been suspended. In view of this, the registration was temporarily restored for the time being until the case is heard. .[Read order]