Registration cancellation violated natural justice principles due to inadequate show cause notice and ignored relocation explanation

Delhi HC found that the respondent's cancellation of petitioner-consortium's registration violated principles of natural justice. The show cause notice failed to specify reasons for cancellation and did not mention an inspection conducted on 05.07.2021 that allegedly revealed the unit's non-existence at registered premises. The petitioner-consortium had informed authorities in its reply dated 23.11.2021 about shifting business location and provided supporting documents, but this explanation was not addressed in the cancellation order dated 08.12.2021. Matter was listed for further hearing on 15.09.2022.

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Issues:
Challenge to order cancelling registration under CGST Act, 2017 based on lack of reasons provided in show cause notice (SCN); Appeal against rejection of revocation application; Failure to consider explanation for non-existence of business premises; Delegation of powers by liquidator to contest the matter.

Analysis:
The writ petition challenges the order cancelling the petitioner-consortium's registration under the Central Goods and Services Tax Act, 2017. The impugned order was passed by the Joint Commissioner, Central Goods and Service Tax, Appeals-I, Delhi, against the order of the Deputy Commissioner Ward 115 (Special Zone) cancelling the registration. The cancellation was based on a show cause notice (SCN) dated 08.07.2021, which lacked specific reasons for the proposed action. The respondent failed to provide adequate grounds for the cancellation, compromising the principles of natural justice.

The petitioner-consortium filed an application for revocation of the cancellation order, citing a shift in business premises. Despite submitting a reply to the subsequent SCN issued on 17.11.2021, explaining the non-existence of the unit at the registered premises and providing supporting documents for relocation, the revocation application was rejected on 08.12.2021. The rejection order did not address the explanation provided by the petitioner-consortium regarding the change in business location.

The first appellate authority upheld the cancellation order, stating that the petitioner-consortium failed to justify revoking the registration cancellation. It was noted that the lead member of the consortium, Pratibha Industries Limited, was ordered for liquidation by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016. The liquidator, Mr. Anil Mehta, delegated his contesting powers to Mr. Ansoo Saurabh, an employee of Pratibha Industries Limited, who executed a vakalatnama in favor of the petitioner's advocate, Mr. Rajesh Jain.

There arose a dispute regarding the delegation of powers by the liquidator to Mr. Ansoo Saurabh, with the respondent's counsel arguing against this delegation. To resolve the issue, it was decided that the liquidator would directly execute a vakalatnama in favor of the petitioner's advocate. The matter was listed for further proceedings on 15.09.2022, with instructions for the respondent to reconsider its position in light of the case's facts.

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