2023 (2) TMI 39 - HC - GST

GST Registration Cancellation Overturned: Procedural Defects Invalidate Notice, Emphasizing Taxpayer Rights and Fair Hearing Principles

M/s. DYM Auto World Versus Assistant Commissioner of CGST and Central Excise & Ors.

HC found that the show-cause notice for GST registration cancellation was procedurally flawed due to lack of specific reasons and failure to provide ... Cancellation of GST registration of petitioner - failure to file GST return within the stipulated period of time - It is contended on behalf of the petitioner that due to his physical illness and mental unstability as well as loss in business, he could not file return within the stipulated period of time - HELD THAT:- On factual score it is found that the petitioner was not given opportunity of hearing. The petitioner was under tremendous mental stress at that point of time for which he tried to commit suicide. The extent of his mental stress and physical illness is amply demonstrated in the documents filed by the petitioner with the instant writ petition. This Court holds that the petitioner should be given an opportunity of hearing. But in order to avail of such opportunity, the petitioner shall first make payment of up to date GST with statutory interest and penalty within three weeks from the date - the competent authority, i.e. respondent Nos.1 and 2 shall revive GST number of the petitioner within one week thereafter. Application disposed off. Issues:1. Non-filing of GST return within stipulated period due to petitioner's illness and mental instability.2. Show-cause notice issued for cancellation of GST registration.3. Lack of reasons provided in the show-cause notice.4. Failure to give the petitioner a reasonable opportunity of hearing.5. Legal implications of cancellation of GST registration.Analysis:1. The petitioner, a GST payee, failed to file the GST return within the stipulated period due to severe losses in business and personal issues, leading to mental instability. Despite being served a show-cause notice for continuous non-compliance, the petitioner was unable to respond promptly due to his condition, which was acknowledged in the impugned order.2. The show-cause notice lacked specific reasons for the directive issued to the petitioner. The petitioner argued that the order for cancellation of GST registration was flawed as it did not afford him a reasonable opportunity of being heard, a crucial procedural requirement in such matters.3. The petitioner's advocate cited legal precedents emphasizing the importance of providing reasons in administrative orders to ensure a fair hearing process. The court considered the petitioner's mental and physical state during the relevant period, highlighting the need to grant him an opportunity to be heard before any adverse action is taken.4. In light of the circumstances, the court ruled that the petitioner should be granted a proper hearing. However, to avail this opportunity, the petitioner was directed to clear his outstanding GST dues, including interest and penalties, within a specified timeframe. Upon compliance, the competent authority was instructed to reinstate the petitioner's GST registration promptly.5. The judgment underscored the significance of due process and fair treatment in matters of tax compliance, emphasizing the need for authorities to consider the individual circumstances of taxpayers before taking punitive actions like cancellation of registration. The court's decision aimed at balancing the interests of the taxpayer with the regulatory requirements under the GST Act, ensuring a just and equitable resolution to the dispute.