Show-cause notice lacking reasons or hearing details and cryptic cancellation order quashed for denying natural justice

The HC held that the show-cause notice dated 02.11.2021 failed to state specific reasons or attach supporting documents and did not specify a time or date for hearing, reflecting non-application of mind and denial of reasonable opportunity of hearing, thereby violating principles of natural justice. Consequently the cancellation order dated 07.10.2022 was found cryptic and without reasons; both the notice and the cancellation order were quashed and set aside and the petition was allowed.

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Issues:
Challenge to show-cause notice and order cancelling registration under GST Act.

Analysis:
The petitioner challenged a show-cause notice dated 02.11.2021 and an order dated 07.10.2022 proposing and subsequently cancelling the registration under the Gujarat Goods and Services Tax Act, 2017 (GST Act). The controversy revolved around the lack of specific reasons provided in the show-cause notice for the proposed cancellation, leading to a violation of Principles of Natural Justice. The petitioner contended that the notice was cryptic, making it impossible to respond adequately. The order of cancellation cited the reason as the validity of transactions not being substantiated, without providing detailed justification. The petitioner argued that the authority initiating the proceedings was not competent to do so. The petitioner's advocate relied on a previous court decision to support the claim that the lack of communication of reasons in the notice and order violated principles of natural justice. On the other hand, the respondent argued that the notice and order were in line with the Act's provisions. However, it was acknowledged that both lacked specific reasons.

The Court observed that the show-cause notice failed to specify reasons for the proposed cancellation and did not include supporting documents to justify the action. Additionally, the notice did not mention a specific time or date for a response, indicating a lack of application of mind by the respondent authority. The Court emphasized that reasons are crucial in any order, and the non-communication of reasons denies a reasonable opportunity for a hearing, leading to a miscarriage of justice and a violation of natural justice principles. Consequently, the Court concluded that the show-cause notice and the order of cancellation were cryptic and devoid of reasons, warranting them to be quashed and set aside. The respondent was granted liberty to issue a fresh notice with detailed reasons and provide a reasonable opportunity for a hearing before passing a new order in accordance with the law. The Court directed the restoration of the petitioner's registration without delay. It was clarified that the decision did not delve into the merits of the case, and no costs were imposed on either party.

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