In its ruling, the court set aside the impugned suspension order, directing the GST department to review the petitioner’s reply and issue a decision in accordance with the law. The court stressed that any further actions must align with legal procedures, including the option to pursue civil and criminal actions if warranted.
In a landmark judgment, in case of Tvl. A.V. Traders vs CTO (WP No. 31285/2024), the Madras High Court has ruled that the suspension of Goods and Services Tax (GST) registration without first initiating civil or criminal proceedings directly infringes upon the fundamental right of individuals and businesses to conduct trade. Justice Krishnan Ramasamy stated that the respondent, in this case, failed to follow proper legal channels by suspending the GST registration of the petitioner, Tvl. A.V. Traders, without initiating requisite legal proceedings. According to the court, such action “directly hit[s] the fundamental right of the petitioner,” a right protected by the Indian Constitution.
Suspension of GST Registration Should Follow Due Process, Not Arbitrary Action
The petitioner, represented by counsel Mr. D. Vijayakumar, contended that the GST authorities issued a notice in Form GST REG-17 on September 5, 2024, regarding possible cancellation of registration. In response, the petitioner submitted a reply on September 12, 2024. However, despite the petitioner’s compliance and timely response, the respondent had not made a decision on the revocation of the GST suspension. The petitioner argued that the abrupt suspension halted business operations and denied the ability to file returns, significantly impacting their business.
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The counsel argued that the suspension was arbitrary and in violation of constitutional rights, as the law provides for civil and criminal remedies if there is alleged misconduct, such as obtaining registration through fraud or failing to operate from a registered location. Instead, the respondent unilaterally suspended the petitioner’s GST registration on September 5, 2024, without adhering to due process.
High Court Affirms Right to Trade, Directs Authorities to Follow Proper Legal Channels
The Additional Government Pleader, Mr. T.N. Kaushik, assured the court that the petitioner’s reply would be duly considered and that a decision would be made in a timely manner as directed by the court. The court underscored that even if there was alleged fraud or operational non-compliance, the respondent is obligated to follow the legal provisions under the GST Act, which allows for civil and criminal actions rather than immediate suspension.
Justice Ramasamy highlighted that suspending GST registration without considering the petitioner’s response or following due process denies the petitioner’s fundamental right to trade, protected by Article 19(1)(g) of the Indian Constitution. The court concluded that such actions were arbitrary and constituted an “unconstitutional denial” of the petitioner’s right to carry on business.
Court Sets Aside GST Registration Suspension, Orders Department to Reconsider Reply
In its ruling, the court set aside the impugned suspension order, directing the GST department to review the petitioner’s reply and issue a decision in accordance with the law. The court stressed that any further actions must align with legal procedures, including the option to pursue civil and criminal actions if warranted.
This judgment underscores the necessity for GST authorities to adhere to due process and respect the fundamental rights of businesses, providing a significant precedent for similar cases involving GST registration disputes.
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