GST registration cancellation quashed for defective show cause notice lacking specific fraud allegations

Bombay HC quashed GST registration cancellation order for violating natural justice principles. The show cause notice failed to specify allegations of fraud, wilful misstatement, or suppression of facts against petitioner, keeping them in darkness about charges. The cancellation order lacked reasoning and demonstrated non-application of mind. Court held both notice and order were mechanically passed without proper consideration. HC directed customs authorities to review adjudication procedures and submit report within four weeks identifying precautions against faulty show cause notices.

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Issues Involved:
1. Validity of the show cause notice dated 27th July 2022.
2. Legality of the impugned order dated 11th November 2022 canceling the petitioner's GST registration.
3. Compliance with principles of natural justice.
4. Accountability of the designated officer issuing the defective notice.

Summary:

Issue 1: Validity of the Show Cause Notice
The petitioner challenged the show cause notice dated 27th July 2022 under Article 226 of the Constitution of India, arguing that it did not furnish any reason for the alleged fraud, willful misstatement, or suppression of facts. The court observed that the notice was defective as it lacked material details necessary for the petitioner to respond effectively. The notice failed to inform the petitioner of the allegations, thus violating principles of natural justice.

Issue 2: Legality of the Impugned Order
The impugned order dated 11th November 2022, which canceled the petitioner's registration, was also challenged. The court found that the order did not provide any reasons for the cancellation and was passed without giving the petitioner an opportunity for a hearing. This lack of reasoning and breach of natural justice rendered the order illegal and a nullity.

Issue 3: Compliance with Principles of Natural Justice
The court emphasized that the impugned order was passed in patent breach of the principles of natural justice and showed gross non-application of mind. The order was passed mechanically, without setting out reasons, and thus could not be justified by reasons furnished later in the reply affidavit.

Issue 4: Accountability of the Designated Officer
The court noted that the defective show cause notice and the mechanical passing of the impugned order were counter-productive to the interest of revenue. The court directed the respondents to take a serious view of such issues and consider fixing accountability on officers who issue defective notices and orders.

Directions:
1. The show cause notice dated 27th July 2022 and the consequential order dated 11th November 2022 are quashed and set aside.
2. The respondents are at liberty to initiate fresh proceedings with a proper show cause notice that sets out appropriate reasons, to be adjudicated in accordance with law after granting the petitioner an opportunity to respond and a personal hearing.
3. All contentions of the parties are expressly kept open.
4. The respondents may exercise any other powers available in law as warranted by the facts and circumstances.
5. Setting aside the impugned order will restore the petitioner's registration status, but the revenue is not precluded from issuing a fresh order to suspend the registration as permissible by law.
6. The petition is disposed of with no costs.

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