GST registration cancellation quashed due to vague show cause notice lacking specific reasons and violating natural justice principles

The MP HC quashed the cancellation of petitioner's GST registration, finding the show cause notice lacked sufficient reasons and supporting material to enable proper defense. The court held that merely alleging fraud, willful misstatement, or suppression of facts without explaining why, how, and under what circumstances was insufficient. The notice failed to provide reasonable opportunity of being heard, violating principles of natural justice (audi alteram partem). The court declared the cancellation order, rejection of revocation application, and appellate order as vitiated in law for being vague and issued without following due process. The petition was allowed.

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Issues Involved:
1. Vagueness of the show cause notice.
2. Denial of reasonable opportunity to the petitioner.
3. Violation of principles of natural justice.
4. Validity of subsequent orders based on the initial flawed notice.

Summary:

Vagueness of the Show Cause Notice:
The petitioner contended that the show cause notice dated 28.01.2022 was vague as it did not supply relevant reasons and material for the proposed cancellation of registration under the State Goods and Services Tax Act (SGST). The notice merely stated that the registration was obtained by "fraud, wilful misstatement or suppression of facts" without any supporting material.

Denial of Reasonable Opportunity:
The petitioner argued that they were denied a reasonable opportunity to defend themselves and reply to the show cause notice, thus breaching the rule of natural justice (audi alteram partem). The impugned order of cancellation of registration was passed without considering the petitioner's reply, which was filed within the prescribed period.

Violation of Principles of Natural Justice:
The court observed that the principle of natural justice was disregarded by the Revenue at the initial stage of issuing the show cause notice. The notice did not contain sufficient reasons to enable the petitioner to file a reply, and the subsequent orders were also bereft of any substantial reasons. The appellate authority's physical verification of the petitioner's premises could not validate the initial procedural deficiencies.

Validity of Subsequent Orders:
The court noted that the subsequent orders, including the rejection of the application for revocation of cancellation and the dismissal of the appeal, were vitiated due to the initial flawed notice. The appellate authority failed to address the violation of natural justice principles and relied on a physical verification conducted at the appellate stage.

Conclusion:
The court quashed the impugned orders of cancellation of registration, rejection of the application for revocation, and the appellate order. The Revenue was granted liberty to issue a fresh, proper, and lawful show cause notice to the petitioner if so advised.

Orders:
1. W.P. No.21659 of 2022: The impugned order of cancellation dated 11.02.2022, the order of rejection of application for revocation dated 30.03.2022, and the appellate order dated 13.06.2022 were quashed.
2. W.P. No.22416 of 2022: The impugned order of cancellation dated 25.03.2022 and the appellate order dated 13.06.2022 were quashed.
3. The Revenue is permitted to issue a fresh, proper, and lawful show cause notice to the petitioner-assessee.

Costs:
No order as to costs.

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