GST registration cancellation notice without reasons violates natural justice; retrospective effect set aside, fresh proceedings permitted

HC held that the SCN for cancellation of petitioner's GST registration was bereft of particulars and violated principles of natural justice, as it did not specify reasons, quantum of wrongful ITC, or any refund claimed, nor mention retrospective effect. The impugned order also lacked reasons, relying only on non-filing of reply. HC set aside the SCN and cancellation order to the extent they operated retrospectively, directing that cancellation shall take effect prospectively from April 2021, as the business closed in March 2021. HC left it open to the department to initiate fresh proceedings with a proper SCN and hearing.

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Issues involved:
The judgment involves the cancellation of GST registration with retrospective effect, lack of particulars in the Show Cause Notice (SCN), unreasoned impugned order, and the petitioner's closure of business.

Cancellation of GST registration with retrospective effect:
The petitioner filed a petition challenging the cancellation of GST registration with retrospective effect. The petitioner's GST registration was cancelled by an order without specifying any reason for cancellation except for the absence of a response to the SCN. The court found that the SCN lacked particulars and the impugned order was unreasoned. As the petitioner had closed the business in March 2021, the court directed that the cancellation of GST registration should take effect from April 2021, considering the lack of opportunity for the petitioner to object to the retrospective cancellation.

Lack of particulars in the Show Cause Notice (SCN):
The SCN issued to the petitioner proposing the cancellation of GST registration did not mention specific details such as the offending invoices, the quantum of wrongful availment of Input Tax Credit (ITC), or any refund claimed. The court noted that the lack of particulars in the SCN rendered it insufficient and unfair to the petitioner, as it did not provide a clear basis for the cancellation.

Unreasoned impugned order:
The impugned order cancelling the petitioner's GST registration did not provide any reasons for the cancellation other than the absence of a response to the SCN. The court observed that the order lacked reasoning and failed to justify the retrospective cancellation of the registration. Consequently, the court set aside the impugned order to the extent it cancelled the registration retrospectively.

Petitioner's closure of business:
The petitioner claimed to have closed down the business in April 2021 due to the pandemic, and the Director had instructed the Accountant to inform the GST Authorities about the closure. However, this information was not submitted, leading to the cancellation of GST registration. The court considered the closure of business as a crucial factor in determining the effective date for the cancellation of registration, emphasizing the importance of providing a reasonable opportunity to be heard before such actions.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

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