2022 (12) TMI 1102 - HC - GST

Registration cancellation quashed for lack of valid reasons in show-cause notice violating natural justice principles

Dee Cubes Diamonds Pvt. Ltd. Versus State Of Gujarat

Gujarat HC quashed cancellation of petitioner's registration due to lack of valid reasons. The show-cause notice dated 26.05.2022 failed to specify ... Cancellation of registration of petitioner - no valid reason provided - HELD THAT:- Perusal of both these orders dated 26.05.2022 and 11.10.2022 show that no valid reason was given for cancellation of registration. Despite requested for, no details were provided and prima facie reply of the petitioners have not been considered. To our opinion, the show-cause notice dated 26.05.2022 does not specify the reason for which the allegation of wrongful availment or utilization of Input Tax Credit (ITC) or refund of tax is made. As the show-cause notice does not contain reason to justify the action of the respondent, it is violative of principles of natural justice. As held by this Court in AGGARWAL DYEING AND PRINTING WORKS VERSUS STATE OF GUJARAT & 2 OTHER (S) [2022 (4) TMI 864 - GUJARAT HIGH COURT], reasons are heart and soul of the order and non-communication of the same itself amounts to denial of reasonable opportunity of hearing resulting into miscarriage of justice. Therefore, applying the same principle, as the show-cause notice dated 26.05.2022 is bereft of any reasons, the same deserves to be quashed and set aside and hereby quashed and set aside. The order of cancellation of registration dated 11.10.2022 is also quashed and set aside. Petition disposed off. Issues:Challenge to show-cause notice and cancellation of registration under GST Act.Analysis:The petitioners, engaged in bullion trading, were registered under the Central/Gujarat Goods and Services Tax Act, 2017. Following a search by the Central GST Department, they reversed Input Tax Credit and made payments to avoid coercive actions. Subsequently, the State GST Department alleged wrongful invoicing without evidence, leading to a show-cause notice for registration cancellation. The petitioners responded, requesting details supporting the allegations, but the registration was canceled without a fair hearing. The petition challenged the cancellation order as arbitrary and lacking in natural justice principles.The petitioner's counsel argued that the cancellation order exceeded the show-cause notice's scope, lacked reasons, and violated natural justice principles. They contended that the vague show-cause notice hindered a proper response, as no supporting documents were provided. Citing legal precedent, the counsel sought to quash the notice and subsequent cancellation order.In response, the Assistant Government Pleader defended the show-cause notice's procedural compliance, stating that the petitioners' reply lacked transaction justifications, leading to the cancellation order. However, the High Court found both the notice and cancellation order deficient in providing valid reasons for registration cancellation. Emphasizing the importance of reasons in legal orders, the Court ruled the lack of justification in the notice violated natural justice principles. Quashing both the notice and cancellation order, the Court directed the restoration of the petitioner's registration. The respondents were given the opportunity to issue a fresh notice with detailed reasons, allowing the petitioners a fair chance to respond before a new decision is made.In conclusion, the Court's decision emphasized the necessity of providing valid reasons in legal orders to ensure procedural fairness and uphold natural justice principles. The judgment highlighted the importance of a clear and justifiable basis for administrative actions, ultimately leading to the quashing of the show-cause notice and cancellation order, with directions for a fair reconsideration process.