GST registration cancellation overturned due to inadequate show cause notice violating natural justice principles

The Gujarat HC allowed a petition challenging the cancellation of GST registration, finding clear violation of natural justice principles. The tax authority issued a cryptic one-line show cause notice stating the taxpayer had not filed returns for six continuous months, followed by an equally brief dismissal order. The court relied on precedent from Aggarwal Dyeing and Printing Works case, noting similar deficiencies had been previously highlighted to authorities. Despite assurances that proper procedures would be circulated to all concerned officers, the October 2021 notice demonstrated continued non-compliance with natural justice requirements, warranting revocation of the cancellation order.

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Issues:
Violation of principle of natural justice in issuing cryptic show cause notice and order.

Analysis:
The petitioner challenged the respondent authority's actions for violating the principle of natural justice by issuing cryptic show cause notices and orders. The petitioner sought admission of the petition, issuance of appropriate writs to quash the impugned order, and a stay on its execution. The Court issued a notice for final disposal on 30.11.2022 and heard arguments from both parties. The learned AGP argued that the appellate authority could not interfere due to a delay of over 120 days, acknowledging the auto-generated nature of the show cause notice and order.

In a previous case, the Court dealt with the issue of limitation in Aggarwal Dying and Printing Works vs. State of Gujarat. The Court found the cryptic nature of the notice and order to be a violation of natural justice, depriving the concerned party of the opportunity to address the matter effectively. Citing previous directions and findings, the Court emphasized the importance of providing reasons in decisions, stating that reasons are the heart and soul of an order. The Court highlighted the necessity of reasons for transparency, accountability, and ensuring justice is not only done but also appears to be done.

The Court noted that the initial notice and order in this case were similarly cryptic, indicating a clear violation of natural justice. Following the precedent set in Aggarwal Dyeing & Printing Works, the Court allowed the petition solely on the grounds of natural justice violation. The show cause notice and impugned order were quashed, granting the respondent the opportunity to issue a fresh notice with detailed reasons and provide a fair hearing to the petitioner for a proper decision on merit. The GST Registration Number of the applicant was restored immediately.

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