2022 (12) TMI 851 - HC - GST

GST registration cancellation quashed for inadequate show cause notice violating natural justice principles

Mahendra Janubhai Zala Versus Office Of The Deputy Commissioner, State Tax

Gujarat HC allowed challenge to GST registration cancellation due to violation of natural justice principles. The court found both the show cause notice ... Violation of principles of natural justice - cancellation of GST registration of petitioner - HELD THAT:- Noticing the cryptic notice as also the order which again is very cryptic and impugned in this petition applying the decision of this Court Aggarwal Dyeing and Printing Works [2022 (4) TMI 864 - GUJARAT HIGH COURT] and the directions issued by this Court, according to us, challenge deserves to be entertained. This amounts to violation of principle of natural justice as the person concerned would have no opportunity to deal with the matter as otherwise required of him. Again, the very purpose of issuance of show cause notice is to avail an opportunity to the parties and if the matter can be addressed at that stage, the very purpose of the notice get frustrated once there is such cryptic notice which makes hardly any sense. It would not require further dilation of the issue since in case of Aggarwal Dyeing and Printing Works (supra) the Court had extensively and elaborately dealt with the same and also given the directions extensively for the authority to follow. We are also persuaded by the learned AGP that the kind of error which has been noticed in the present case is coming up for the first time and therefore, no cost should be imposed. The fact remains that the portal has not been amended till date and this matter has consumed substantial judicial time as the issue has dragged almost for six months and again with fresh notice, it is going to take a lot much time of all concerned only because of the technical glitches need to be amended at the end of the authority concerned. Application disposed off. Issues Involved:1. Violation of the principles of natural justice.2. Cryptic nature of the show cause notice and cancellation order.3. Delay in challenging the impugned notice and order.4. Restoration of GST registration.5. Imposition of costs due to procedural lapses.Detailed Analysis:1. Violation of the Principles of Natural Justice:The petitioner, a sole proprietor, challenged the respondent authority's action on the grounds of violation of the principles of natural justice, leading to the cancellation of his GST registration. The petitioner argued that the cryptic nature of the show cause notice and the subsequent order did not afford him a reasonable opportunity to respond, thus amounting to a denial of natural justice. The court noted that the purpose of a show cause notice is to provide an opportunity to address the matter, which was frustrated by the cryptic nature of the notice.2. Cryptic Nature of the Show Cause Notice and Cancellation Order:The petitioner contended that the show cause notice issued on 15.05.2018 and the cancellation order dated 13.08.2018 were cryptic and lacked detailed reasoning. The court referenced the decision in Aggarwal Dyeing and Printing Works vs. State of Gujarat, which emphasized the necessity of detailed reasoning in administrative and quasi-judicial orders. The court reiterated that reasons are the 'heart and soul of the order' and that non-communication of reasons amounts to a denial of a reasonable opportunity of hearing, resulting in a miscarriage of justice.3. Delay in Challenging the Impugned Notice and Order:The respondent argued that there was a significant delay of four years in challenging the impugned notice and order, and the time period for appeal had lapsed. However, the court took into consideration the petitioner's explanation regarding his unfamiliarity with technology, the negligence of the accountant, and the passing away of key personnel. The court chose not to endorse these reasons but focused on the fundamental issue of the cryptic nature of the notice and order.4. Restoration of GST Registration:The court allowed the petition, quashing the impugned order and the cryptic notice. The court directed the respondent to issue a fresh show cause notice with detailed reasons and to provide a reasonable opportunity for the petitioner to respond. The GST registration number of the petitioner was ordered to be restored forthwith. The court emphasized the need for adherence to the principles of natural justice and the requirement for detailed reasoning in administrative orders.5. Imposition of Costs Due to Procedural Lapses:The court decided not to initiate action against the concerned officer for the procedural lapses but noted that the department could have rectified the issue earlier. The court imposed a cost of Rs. 25,000 on the department, to be paid to the Gujarat High Court Advocates Association Welfare Fund, due to the repetitive nature of such procedural errors. The court highlighted the need for the GSTN portal to be amended to prevent such issues in the future.Conclusion:The court allowed the petition on the grounds of violation of the principles of natural justice due to the cryptic nature of the show cause notice and cancellation order. The court quashed the impugned order and notice, directed the restoration of the petitioner's GST registration, and imposed costs on the department for procedural lapses. The court underscored the importance of detailed reasoning in administrative orders and adherence to the principles of natural justice.