2023 (7) TMI 98 - HC - GST

Arbitrary CGST Registration Cancellation Overturned: Administrative Action Requires Fair Hearing and Proper Notice

HC found Respondent No. 2 acted arbitrarily in canceling Petitioner's CGST registration. The court set aside the show cause notice and cancellation order, ... Breach of principles of natural justice - arbitrary exercise of statutory power - cancellation of GST registration - service of show cause notice by uploading on web portal - opportunity of being heard - provisional attachment of bank account/property - remand for fresh adjudication on a fresh show cause noticeBreach of principles of natural justice - arbitrary exercise of statutory power - cancellation of GST registration - opportunity of being heard - Impugned cancellation of the petitioner's GST registration was arbitrary and in breach of the principles of natural justice and is liable to be set aside. - HELD THAT: - The Court found that the show cause notice issued on 1 August 2022 - uploaded only on the web portal and requiring presence on the next day at an unusual time - did not afford a reasonable opportunity to the petitioner to be heard. The petitioner submitted a reply dated 8 August 2022 which was received on 9 August 2022, but despite service of the writ petition on Respondent No.2, the registration was cancelled by order dated 2 January 2023. The impugned order also dealt with matters not contained in the show cause notice. In these circumstances the Court concluded that Respondent No.2 acted arbitrarily in exercising the power to cancel registration without observing basic principles of natural justice, and therefore set aside the show cause notice and the cancellation order. [Paras 1, 3, 4]Show cause notice and the order dated 2 January 2023 cancelling the petitioner's registration set aside for breach of natural justice and arbitrary exercise of power.Remand for fresh adjudication on a fresh show cause notice - service of show cause notice by uploading on web portal - opportunity of being heard - Respondent may issue a fresh show cause notice; matter remitted for fresh consideration with direction to afford an opportunity to reply and to serve notice effectively. - HELD THAT: - The Court clarified that Respondent No.2 is at liberty to issue a fresh show cause notice, but any such notice must be replied to by the petitioner in accordance with law. The Court further observed that when action is contemplated against a dealer's registration, service should not be limited to portal upload alone and a copy should also be forwarded by e mail and/or by hand delivery to ensure effective opportunity to reply. The effect is that the matter is remanded for fresh adjudication on any fresh notice after proper service and opportunity to be heard. [Paras 5, 6]Matter remitted: Respondent may issue fresh show cause notice and must afford effective service and an opportunity to reply before taking action on registration.Final Conclusion: The High Court set aside the show cause notice and the order cancelling the petitioner's GST registration for arbitrariness and breach of natural justice, and remitted the matter permitting issuance of a fresh show cause notice subject to proper service and an opportunity to be heard. Issues involved: Arbitrary cancellation of CGST registration, breach of principles of natural justice, validity of show cause notice, exercise of powers u/s 83 of CGST/SGST Act, 2017.The High Court of Bombay heard the case where Respondent No. 2, the Superintendent, acted arbitrarily in canceling the Petitioner's CGST registration. The show cause notice issued to the Petitioner was peculiarly short, calling for a response the next day at a specific time. The Petitioner submitted a reply to the notice, but the Joint Commissioner issued orders for provisional attachment of assets u/s 83 of the CGST/SGST Act. Subsequently, the Petitioner approached the Court, alleging arbitrariness in Respondent No. 2's actions and a violation of natural justice principles, as the Petitioner was not given a proper hearing before adverse orders were passed.Despite being aware of the petition, Respondent No. 2 proceeded to cancel the Petitioner's registration, including issues not part of the original show cause notice. The Court found that Respondent No. 2 acted arbitrarily and in breach of natural justice principles. Consequently, the Court set aside both the show cause notice and the order canceling the registration, allowing Respondent No. 2 to issue a fresh show cause notice, providing the Petitioner with an opportunity to respond in accordance with the law.The Court also emphasized the importance of ensuring that show cause notices regarding dealer registrations are not only uploaded on web portals but also sent directly to the dealers via email or hand delivery to facilitate effective responses. The case was disposed of with no costs incurred.