2023 (10) TMI 792 - HC - GST

Registration cancellation quashed due to defective show cause notice lacking specific fraud grounds

Makersburry India Pvt. Ltd. Versus State of Maharashtra, The Deputy Commissioner of State Tax, Appellate Authority, Mumbai, The State Tax Officer Nodal – 5, Mumbai

Bombay HC allowed the petition challenging cancellation of petitioner's registration. The court found the show cause notice defective as it failed to ... Cancellation of the petitioner’s registration - Allegation that registration obtained by means of fraud, willful misstatement or suppression of facts - HELD THAT:- The show cause notice itself was defective, as it did not set out any reasons/grounds which could be responded by the petitioner against the cancellation of the petitioner’s registration. The reasons which were furnished were undoubtedly vague. It is difficult to conceive as to how such contents of the notice could be responded when no reasons to support such allegation were provided in the show cause notice. The order dated 17 October, 2022 passed by the designated officer cancelling the petitioner’s registration was inherently defective, as again no reasons were furnished dealing with the case as set out by the petitioner in the reply as filed to the show cause notice. There is no discussion whatsoever on any of the documents. The petitioner would be justified in placing reliance on the decision of this Court in MONIT TRADING PRIVATE LIMITED VERSUS UNION OF INDIA & ORS. [2023 (7) TMI 911 - BOMBAY HIGH COURT] in which in identical circumstances and being confronted with a similar show cause notice, the action on the part of the department was set aside. Similar view has been taken by this Court in the case of NIRAKAR RAMCHANDRA PRADHAN VERSUS UNION OF INDIA & ORS. [2023 (9) TMI 1176 - BOMBAY HIGH COURT] which was a case wherein similar circumstances the department attempted to justify the impugned order by filing a detailed affidavit as sought to be done in the present case. The Court had expressed its displeasure in the department adopting such approach. Thus, time and again the department is not required to be told by the Court as to what would be the position in law as also the correct approach in law, the officers needs to follow - there are no manner of doubt that the impugned order would be required to be set aside. The impugned show cause notice dated 22 August, 2022 is quashed and set aside - petition allowed. Issues Involved:1. Validity of the show cause notice for cancellation of registration.2. Application of principles of natural justice.3. Adequacy of reasons provided in the cancellation order.4. Appellate authority's consideration of submitted documents.5. Justification of the impugned orders by the respondents.Summary:1. Validity of the Show Cause Notice:The petitioner challenged an order dated 26 April 2023 by the Deputy Commissioner of State Tax, which canceled the petitioner's registration under the IGST and CGST Acts, based on a show cause notice dated 22 August 2022. The show cause notice alleged that the registration was obtained by fraud, willful misstatement, or suppression of facts. The court found the notice defective as it did not set out specific reasons or grounds, making it difficult for the petitioner to respond.2. Application of Principles of Natural Justice:The petitioner argued that the reasons for cancellation were vague and arbitrary, breaching the principles of natural justice. The court agreed, noting that the show cause notice and the subsequent orders did not address the petitioner's contentions or the documents submitted, indicating non-application of mind by the authorities.3. Adequacy of Reasons Provided in the Cancellation Order:The cancellation order dated 17 October 2022 cited the petitioner's failure to explain their absence during a visit by the authorities and the lack of business activity or stock at the registered place. The court found these reasons arbitrary and unsupported by the petitioner's submitted documents, which were not considered by the authorities.4. Appellate Authority's Consideration of Submitted Documents:The petitioner submitted various documents to the appellate authority, including business agreements, financial statements, and stock records. However, the appellate authority's order lacked any discussion or consideration of these materials, leading the court to conclude that there was a patent non-application of mind.5. Justification of the Impugned Orders by the Respondents:The respondents attempted to justify the impugned orders through an affidavit, but the court found this approach inadequate and outside the scope of the original orders. The court emphasized the need for the authorities to follow legal procedures and provide clear reasons in their decisions.Conclusion:The court quashed the show cause notice, the cancellation order, and the appellate order, restoring the petitioner's registration. It directed the respondents to initiate fresh proceedings, if necessary, in accordance with the law and after providing the petitioner an opportunity for a personal hearing. The court refrained from imposing costs, hoping the respondents would adopt a lawful approach in future proceedings.