2022 (12) TMI 553 - HC - GST

Court Overturns Cancellation of GST Registration Due to Procedural Errors and Insufficient Show Cause Notices.

M/s. S.B. Traders Versus The Superintendent, Hyderabad, The Principal Commissioner of Central Tax, Hyderabad, The Union of lndia, represented by its Secretary

The HC allowed the writ petition, setting aside the orders cancelling the petitioners' GST registration due to procedural irregularities and insufficient ... Cancellation of GST registration of the petitioner - no SCN issued for cancellation of registration - principles of natural justice - HELD THAT:- It is evident that there is no reason at all to issue show cause notice for cancellation of GST registrations of the petitioners. Respondent simply mentioned that in case the petitioners have obtained GST registration by means of fraud, wilful misstatement or suppression of facts, then their GST registrations were liable to be cancelled. No particulars of any such fraud, wilful misstatement or suppression of facts have been mentioned. In fact the notice issuing authority himself was not certain whether the GST registrations were obtained by the above means. Therefore, he says that ‘in case registrations were obtained by such means’. Issuance of show cause notice for cancellation of GST registration has got serious consequences and could not have been issued in such a cavalier manner. In the present case, the petitioners had submitted show cause reply on 12.10.2022 and on the very same day i.e., on 12.10.2022, the impugned orders were passed cancelling GST registrations of the petitioners. The reason given for such cancellation is that as per directions of the Head Office dated 28.09.2022, the registrations were suspended and cancelled. What was the direction of the Head Office was not disclosed. Suspending registrations on the basis of direction of the Head Office cannot be a reason for cancellation of GST registration. From a conjoint reading of the show cause notices and orders for cancellation of the registrations, we are of the view that conduct of the first respondent does not at all inspire the confidence of the Court. There appears to be something amiss in the entire affair. The show cause notices were issued and the impugned orders were passed in a most mechanical manner exhibiting complete non-application of mind - the impugned orders for cancellation of GST registration dated 29.09.2022 of the petitioners is set aside. Petition allowed. Issues:1. Legality and validity of orders cancelling Goods and Services Tax (GST) registration.2. Compliance with procedures in issuing show cause notices.3. Lack of specifics in the reasons for cancellation.4. Timelines and procedural irregularities in the show cause notices.5. Justification for cancellation based on directions from Head Office.6. Lack of confidence in the conduct of the first respondent.7. Remedial steps to be taken by the Principal Commissioner of Central Tax.Analysis:1. The petitioners challenged the legality and validity of the orders dated 12.10.2022 cancelling their GST registration. The court noted that the show cause notices issued by the first respondent lacked specific details regarding the alleged fraud or suppression of facts that led to the cancellation. The court emphasized that show cause notices for such serious consequences should not be issued based on surmises and conjectures.2. The court highlighted procedural irregularities in the show cause notices, noting that while the petitioners were given seven working days to respond, they were also directed to appear before the first respondent the very next day. This contradictory timeline raised concerns about the fairness of the process and the opportunity given to the petitioners to present their case.3. The court scrutinized the justification provided for the cancellation, which was based on directions from the Head Office. The lack of disclosure regarding the nature of these directions and the reasoning behind suspending and cancelling the registrations raised doubts about the validity of the decision.4. In assessing the overall conduct of the first respondent, the court expressed a lack of confidence in the handling of the matter. The issuance of show cause notices and the subsequent cancellation of registrations were deemed to be done in a mechanical manner without proper application of mind, indicating a flawed decision-making process.5. Consequently, the court set aside the impugned orders for cancellation of GST registration and directed the Principal Commissioner of Central Tax, Hyderabad Commissionerate, to investigate the conduct and functioning of the first respondent. The court emphasized the need for remedial steps to address the deficiencies observed in the handling of the case.Conclusion:The court allowed the writ petition, setting aside the orders cancelling the GST registration of the petitioners. The court highlighted the procedural irregularities, lack of specifics in the reasons for cancellation, and the mechanical handling of the matter by the first respondent. The directive to the Principal Commissioner to investigate and take remedial steps aimed to address the deficiencies in the conduct of the case.