GST registration cancellation quashed for inadequate reasoning and denial of personal hearing opportunity

Gujarat HC quashed GST registration cancellation order and show cause notice for lack of proper reasoning. The authority issued a cryptic one-line notice alleging fraud without basis or supporting documents. The cancellation order was passed on the same day as petitioner's reply without considering the response or granting requested personal hearing opportunity. Following precedent in OM Trading case, the court found the authority failed to assign necessary reasons, making the cancellation order legally untenable. Petition allowed.

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Issues Involved:
1. Validity of the show cause notice dated 04.08.2022.
2. Legality of the order dated 17.08.2022 canceling the registration certificate.
3. Compliance with principles of natural justice.

Summary:

Issue 1: Validity of the Show Cause Notice
The petitioner challenged the show cause notice dated 04.08.2022 issued under Section 29 of the Central Goods and Services Tax Act, 2017, alleging that the registration was obtained by means of fraud, willful misstatement, or suppression of facts. The petitioner contended that the notice was cryptic and lacked specific reasons, making it impossible to respond appropriately. The court noted that the show cause notice was indeed vague, merely stating, "in case, Registration has been obtained by means of fraud, willful misstatement or suppression of facts," without providing any detailed basis or evidence.

Issue 2: Legality of the Cancellation Order
The petitioner argued that the order dated 17.08.2022 canceling the registration was passed without providing any material evidence or reasons and without considering the petitioner's reply. The court observed that the order was issued on the same day as the petitioner's reply and did not address the petitioner's request for a personal hearing. This indicated a lack of due consideration and procedural fairness.

Issue 3: Compliance with Principles of Natural Justice
The petitioner asserted that the cancellation order breached the principles of natural justice as it was issued without a proper hearing or detailed reasoning. The court referenced similar cases, such as Om Trading Vs. State of Gujarat and Aggrawal Dyeing and Printing Works Vs. State of Gujarat, where vague show cause notices and orders were quashed due to non-compliance with natural justice. The court found that in the present case, the respondent authority failed to provide necessary documents and reasons, rendering the cancellation order untenable.

Conclusion:
The court concluded that the show cause notice dated 04.08.2022 and the cancellation order dated 17.08.2022 were issued without proper basis and in violation of principles of natural justice. Consequently, both the notice and the order were quashed, and the respondent was directed to restore the petitioner's registration forthwith. The petition was allowed, and the rule was made absolute without any order as to costs.

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