Kerala HC quashes GST registration cancellation due to vague show cause notice in wrong form

Kerala HC allowed the writ petition challenging cancellation of GST registration for non-filing of returns for six months. The court found the show cause notice (Ext.P2) was issued in Form GST Reg 31, meant for suspension/revocation rather than cancellation, making it vague and lacking clarity on reasons and defaulted period. The cancellation order was quashed, with petitioner required to file all defaulted returns with applicable tax, late fee, interest, and penalty within two weeks of registration restoration.

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Issues:
1. Cancellation of registration under CGST / SGST Acts for non-filing of returns.
2. Validity of show cause notice and procedural compliance.
3. Interpretation of relevant legal provisions and precedents.
4. Jurisdictional aspects and adherence to prescribed forms.

Analysis:
1. The petitioner challenged the cancellation of registration under the CGST / SGST Acts due to non-filing of returns for six months. The petitioner claimed to have filed the returns but did not appeal against the cancellation order or apply for revocation within the specified time limit under Section 30 of the Acts.

2. The petitioner's counsel cited judgments from the Madras and Gujarat High Courts, emphasizing the need for proper show cause notices and hearings before cancellation. The show cause notice issued to the petitioner was found to be vague and lacking clarity on reasons for cancellation and the specific period of non-compliance. The court held that the notice issued in Form GST REG-31 for suspension of registration did not comply with the requirements of Rule 21 of the CGST Rules.

3. The court referred to legal principles emphasizing that actions must be taken in accordance with prescribed procedures. It highlighted the importance of issuing notices in the correct form, as specified by law, to ensure procedural fairness. The court rejected the argument that strict interpretation in favor of revenue applies in this context, citing relevant Supreme Court decisions on interpreting fiscal legislation and exemptions.

4. Based on the analysis, the court allowed the writ petition, quashing the cancellation order. The court directed the petitioner to fulfill all fiscal obligations, including filing defaulted returns with applicable fees and penalties within two weeks of registration restoration. The judgment clarified that the cancellation order's annulment does not absolve the petitioner of any fiscal liabilities, maintaining the importance of compliance with tax laws.

This detailed analysis of the judgment from the Kerala High Court provides insights into the legal issues surrounding the cancellation of registration under the CGST / SGST Acts, procedural irregularities in issuing show cause notices, adherence to prescribed forms, and the interpretation of relevant legal provisions and precedents.

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