GST registration cancellation quashed for violating natural justice principles under Section 29(2) CGST Act

Bombay HC allowed petitioner's challenge to GST registration cancellation under Section 107 of CGST Act. Court found both original authority and appellate authority violated principles of natural justice. Original authority cancelled registration without providing supporting documents to petitioner and proceeded despite petitioner's adjournment request, falsely recording that petitioner was heard. Appellate authority overlooked these procedural violations and relied on fresh materials not previously considered. HC quashed both the original cancellation order and appellate authority's order dated 23rd January 2023, holding them unsustainable due to breach of natural justice principles under Section 29(2) CGST Act 2017.

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Issues involved:
Cancellation of GST registration under the Central Goods and Service Tax Act, 2017 without following principles of natural justice; Appeal under Section 107 of the CGST Act dismissed by the Appellate Authority, alleging breach of natural justice in the appellate proceedings.

Cancellation of GST Registration:
The Petitioner's registration under the Central Goods and Service Tax Act, 2017 was cancelled by the Superintendent without granting a hearing or furnishing relevant documents, leading to a violation of natural justice principles. The Petitioner responded to the show cause notice for cancellation by requesting time to reply and appear before the concerned officer, but the registration was cancelled without a hearing. The order of cancellation erroneously stated that the Petitioner was heard and submissions were examined, when in fact, no such process took place.

Appeal under Section 107 of the CGST Act:
The Petitioner, aggrieved by the cancellation order, approached the Appellate Authority under Section 107 of the CGST Act. Despite raising grounds of breach of natural justice in the appeal, the Appellate Authority dismissed the appeal without considering the Petitioner's contentions. The Appellate Authority relied on reports regarding tax shortfalls and other suppliers' cancellations, which were not provided to the Petitioner, indicating a lack of procedural fairness.

Judgment:
The High Court found that both the cancellation order and the Appellate Authority's decision were in breach of natural justice principles. The Court noted that the Superintendent failed to grant a personal hearing as required by law before cancelling the registration. The Appellate Authority overlooked the Petitioner's specific grounds and relied on undisclosed materials in its decision. As a result, the Court quashed the cancellation order and the Appellate Authority's decision, directing the restoration of the Petitioner's registration within three weeks. The Court emphasized that if the department intends to proceed with cancellation, it must follow proper procedures and grant the Petitioner a fair hearing.

Conclusion:
The High Court allowed the petition, setting aside the cancellation order and the Appellate Authority's decision, and ordering the restoration of the Petitioner's GST registration. The Court clarified that the department could issue a fresh show cause notice and take appropriate steps in accordance with the law if it intends to proceed with cancellation. All contentions of the parties were kept open, and no costs were awarded in the matter.

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