Natural justice bars ab initio cancellation of VAT registration without a specific show cause notice and hearing.

Cancellation of VAT registration ab initio was unsustainable where the dealer was not first given a show cause notice specifically proposing that action and no effective opportunity of hearing was afforded. Communications seeking documents and clarification did not amount to notice for cancellation. Because an adverse order with civil consequences must comply with natural justice, the authority could not cancel registration in the absence of a meaningful chance to meet the case against it. The matter was remanded to the competent authority for fresh decision after hearing the dealer.

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Issues: Whether cancellation of registration ab initio under section 27(5)(i) of the Gujarat Value Added Tax Act was sustainable when no prior show cause notice and effective opportunity of hearing were given.

Analysis: The cancellation order was passed without first putting the dealer to notice that registration could be cancelled ab initio and without affording a proper hearing on that specific issue. An adverse order having civil consequences cannot be sustained unless the affected person is given a meaningful opportunity to meet the case against it. The earlier communications were only for production of documents and clarification, and did not amount to a show cause notice proposing cancellation. The matter therefore required reconsideration by the authority after granting an opportunity to the dealer.

Conclusion: The cancellation was held unsustainable for breach of section 27(5)(i) and the principles of natural justice, and the matter was remanded to the competent authority for fresh decision after hearing the dealer.

Ratio Decidendi: Where a statute requires hearing before cancellation of registration, an order cancelling registration ab initio without a prior show cause notice specifically proposing such action is void for breach of natural justice.

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