GST Registration Cancellation Overturned Due to Lack of Evidence; Fresh Show Cause Notice to be Issued.

The HC quashed the cancellation of GST registration under Section 29(2)(e) of the CGST Act due to insufficient grounds and lack of evidence of fraudulent practices. The court ordered the restoration of the petitioner's registration and remanded the case for re-adjudication, directing the issuance of a fresh show cause notice. The respondents must provide the petitioner a fair opportunity to respond before any new orders are issued. The judgment highlighted the necessity for proper justification and due process in GST registration cancellations. The writ petition was disposed of without costs, and related miscellaneous petitions were closed.

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Issues:
Challenge to cancellation of GST registration under Section 29(2)(e) of the CGST Act without proper justification and reasons provided in the show cause notice.

Analysis:
The petitioner, a partnership firm engaged in steel and metal trading, challenged the cancellation of its GST registration, contending that the registration was obtained without fraud, wilful misstatement, or suppression of facts. The petitioner explained that the business closure was due to financial crisis and inability to pay rent, leading to surrendering the lease and obtaining a new one. The show cause notice lacked specific reasons for the cancellation, merely citing Section 29(2)(e) of the CGST Act. The petitioner's response was not considered, and the registration was cancelled retrospectively without adequate justification.

Analysis:
The respondents argued that the cancellation was justified under Section 29(2)(e) of the CGST Act as the registered unit was not found at the provided address during physical verification. However, the lack of material supporting fraud, wilful misstatement, or suppression of facts at the time of registration in 2019 rendered the cancellation order inappropriate. The court noted that while the Act allows retrospective cancellation, it necessitates concrete evidence of fraudulent practices, which was absent in this case.

Analysis:
The court held that the cancellation order lacked sufficient grounds and quashed it, remanding the matter for re-adjudication. The respondents were directed to restore the registration pending re-evaluation. The first respondent was instructed to issue a fresh show cause notice, granting the petitioner a fair opportunity to respond before issuing any new orders. The judgment clarified that the restoration of registration did not impede actions for non-filing of returns or tax recovery proceedings.

Analysis:
The writ petition was disposed of without costs, and the connected miscellaneous petitions were closed, emphasizing the need for proper justification and adherence to due process in cancellation of GST registrations under Section 29(2)(e) of the CGST Act.

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