GST registration cancellation set aside due to invalid Show Cause Notice and procedural violations under Rule 25

Delhi HC allowed the petition challenging cancellation of petitioner's GST registration. The court held that the Show Cause Notice (SCN) was invalid as it failed to specify reasons for proposed cancellation. The registration was cancelled based on a pending DGGI Chennai enquiry regarding spurious goods supply and physical verification revealing sealed premises. However, the court found procedural violations including lack of notice for physical verification and failure to upload verification report on portal as mandated under Rule 25 of CGST Rules. The cancellation order was set aside due to these procedural deficiencies.

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Issues:
Cancellation of registration based on show-cause notice lacking specificity and natural justice principles.

Analysis:
The writ petition challenged the cancellation of registration based on an order dated 04.05.2022 by the Superintendent, Ward-66. The order was founded on a show-cause notice (SCN) dated 31.03.2022, which lacked specificity regarding the reasons for proposing the cancellation of registration. The SCN failed to provide any broad facts demonstrating fraud, willful misstatement, or suppression of facts by the petitioner. Despite the petitioner filing a reply within the stipulated time frame, the registration was cancelled based on an enquiry pending against the petitioner by DGGI, Chennai concerning supply of "spurious goods."

The impugned order indicated that the premises of the petitioner were physically verified, and it was found sealed by DGGI, Chennai. However, no tax, interest, penalty, or cess was due from the petitioner. The cancellation of registration was not supported by the content of the SCN, and the Range Inspector's verification report was not uploaded as required by Rule 25 of the CGST Rules. The respondents failed to provide a satisfactory response regarding the verification report, leading to an infringement of Rule 25 of the CGST. The impugned order went beyond the scope of the SCN, warranting the cancellation to be set aside.

The court allowed the prayer in the writ petition, setting aside the impugned order and directing the respondents to restore the registration of the petitioner. However, it was clarified that this order would not prevent the respondents from issuing a fresh SCN or continuing the investigation against the petitioner in accordance with the law. The writ petition was disposed of accordingly, emphasizing adherence to natural justice principles and procedural fairness in such matters.

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