2023 (9) TMI 1353 - HC - GST

Tax Registration Cancellation Overturned: Procedural Fairness Demands Proper Hearing and Opportunity to Respond Under GST Rules

M/s. Bharat Pump House Versus The State of West Bengal & Ors.

M/s. Bharat Pump House Versus The State of West Bengal & Ors. - 2024 (82) G.S.T.L. 167 (Cal.) ISSUES PRESENTED AND CONSIDERED 1. Whether cancellation of provisional GST registration under Rule 24(3) of the Central Goods and Services Tax Rules, 2017, after issuance of a show-cause notice but without affording a personal hearing, violates the mandate of Rule 24(3) and principles of natural justice. 2. Whether an authority is obliged to fix a date for personal hearing and inform the registrant before passing an ex parte order of cancellation where the registrant did not file a written response to the show-cause notice. 3. Appropriate remedy when statutory procedure (personal hearing) is not followed in cancellation of provisional registration - remand for fresh consideration and interim treatment of related notices. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework governing cancellation of provisional registration under Rule 24(3) Legal framework: Rule 24 of the Central Goods and Services Tax Rules, 2017 (migration of persons registered under existing law) provides that provisional registration may be cancelled under sub-Rule (3) where particulars required by sub-Rule (2) are not furnished or are incorrect or incomplete. The rule contemplates issuance of a show-cause notice and, before cancellation, affording the person a reasonable opportunity of being heard. Precedent treatment: The Court did not cite or apply any prior judicial decisions; treatment is by direct construction of Rule 24(3) and application of principles of natural justice. Interpretation and reasoning: The Court interprets Rule 24(3) as mandating that, prior to cancellation, the authority must not merely proceed ex parte because a written reply was not filed, but must inform the registrant and fix a date for personal hearing so that a reasonable opportunity of being heard is provided. The requirement of personal hearing is treated as a substantive procedural safeguard embedded in the Rule, not an optional courtesy. The Court reasons that while non-filing of a written response permits the authority to proceed ex parte, it does not dispense with the obligation to afford an opportunity of personal hearing. Ratio vs. Obiter: Ratio - Rule 24(3) requires the authority to afford a personal hearing before cancelling provisional registration; failure to fix a hearing or inform the registrant amounts to procedural infirmity violating the statutory mandate and principles of natural justice. Obiter - observations on the registrant's willingness to pay taxes and reconciliation of documents are incidental and not necessary for the legal holding. Conclusion: The cancellation decision made without fixing and informing a date for personal hearing is procedurally improper and must be set aside for fresh consideration in accordance with Rule 24(3) and natural justice. Issue 2 - Effect of registrant's non-response to show-cause notice and scope of ex parte action Legal framework: Administrative action may proceed ex parte if the affected party fails to respond, but statutory safeguards (such as personal hearing) remain operative unless clearly excluded by law. Precedent treatment: No precedent invoked; Court applies general administrative law principles alongside Rule 24(3). Interpretation and reasoning: The Court acknowledges that the authority is entitled to proceed ex parte when no response is filed. However, such entitlement does not obviate the duty to inform and grant an opportunity for personal hearing under the Rule. The balance struck is that non-filing justifies proceeding without a written reply but not proceeding without ever offering in-person hearing opportunity; the authority must first give notice of the hearing and then decide based on the outcome of that hearing and available material. Ratio vs. Obiter: Ratio - Non-filing of a written response does not relieve the authority of the obligation to afford a personal hearing before cancellation under Rule 24(3). Obiter - none beyond explanatory remarks. Conclusion: Proceeding ex parte without first fixing and informing a date for personal hearing is inconsistent with the statutory scheme; the authority must allow the registrant to be heard in person (or by authorised representative) before deciding on cancellation. Issue 3 - Appropriate remedy and interim directions where statutory procedure was not followed Legal framework: Judicial review permits quashing of administrative orders tainted by defective procedure and remanding for fresh decision in accordance with law; courts may give consequential directions to govern interim conduct of related notices. Precedent treatment: No case law cited; Court relies on established remedial principles of setting aside orders for procedural infirmity and remanding for fresh consideration. Interpretation and reasoning: Given the failure to provide a personal hearing as required by Rule 24(3), the Court considers remand to the competent tax authority the appropriate remedy so that the registrant can file a response and be heard in person. The Court directs a specific timeline for submission of response (15 days from service) and instructs the authority to keep in abeyance an existing demand/recovery notice during the interregnum, to avoid prejudice pending fresh decision. The Court also clarifies that if the registrant reconciles the mismatch and there are no other legal impediments, cancellation can be set aside and registration restored to enable compliance (filing returns, payment of taxes). Ratio vs. Obiter: Ratio - Quash and remand is the proper relief where Rule-mandated hearing was not afforded; courts may direct abeyance of related enforcement notices until the authority decides afresh. Obiter - guidance that reconciliation of mismatches could lead to restoration of registration is situational and ancillary to the remedial direction. Conclusion: The appropriate remedy is to set aside the cancellation order and remit the matter to the competent officer with directions to (a) allow the registrant to file its response within a short fixed period, (b) afford a personal hearing to the authorised representative, and (c) decide on merits in accordance with law; meanwhile specified notices may be kept in abeyance. Cross-references See Issue 1 (statutory mandate under Rule 24(3)) for the foundational requirement of personal hearing; see Issue 2 for the permissible scope of ex parte action where written reply is not filed; see Issue 3 for the remedial consequence and interim directions when the statutory procedure has not been followed.