GST registration cancellation quashed for lacking specific reasons, violating natural justice principles under tax law

Bombay HC quashed GST registration cancellation order and show cause notice for lacking reasons, constituting incurable defect and violating natural justice principles. The court held that cancellation orders must contain specific reasons, which were absent in this case, making the action arbitrary and illegal. However, regarding bank account attachment, the court declined to exercise discretionary jurisdiction under Article 226, directing the petitioner to pursue statutory remedy under Rule 159(5) of CGST Rules. The registration cancellation was set aside while attachment order remained undisturbed.

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Issues involved:
The issues involved in the judgment are the challenge to the cancellation of registration under the Central Goods and Service Tax Act and the attachment of bank accounts.

Cancellation of Registration:
The petitioner challenged the cancellation of registration under the Central Goods and Service Tax Act, contending that the show cause notice and order did not provide any reasons, making it an incurable defect. The petitioner, being in judicial custody, could not respond to the notice, leading to an ex-parte decision. The petitioner argued that the lack of reasons in the cancellation order rendered it bad in law, citing a previous court decision. The court found that the order lacked reasons, similar to a previous case, and quashed the cancellation order, deeming it arbitrary and illegal.

Attachment of Bank Accounts:
Regarding the attachment of bank accounts, the petitioner claimed no prior intimation was given by the respondents, and he only became aware of the attachment through the banks. The respondents justified the attachment by pointing out that the petitioner transferred a significant amount while in judicial custody. They also highlighted discrepancies in the petitioner's statements regarding employees. The court opined that the petitioner should utilize the remedy under sub-rule (5) of Rule 159 of the Central Goods and Services Tax Rules to challenge the attachment. The court refrained from interfering with the attachment order, advising the petitioner to follow the prescribed remedy.

Judgment:
The court quashed and set aside the show cause notice and the subsequent cancellation of registration due to the lack of reasons provided in the order. The court clarified that the registration would be restored, but the revenue could issue a fresh order to suspend it if necessary. Additionally, the petitioner was permitted to raise objections to the bank account attachment using the remedy available under sub-rule (5) of Rule 159 of the CGST Rules within a week. The court disposed of the petition without imposing any costs.

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