2023 (11) TMI 550 - HC - GST

GST Registration Cancellation Overturned: Procedural Flaws and Insufficient Evidence Invalidate Regulatory Action Against Petitioner

M/s. Samayshristi Enterprises Versus Superintendent, Range - 31, GST Division, New Delhi

HC allowed petitioner's challenge to GST registration cancellation. The order was set aside due to procedural irregularities, lack of specific fraud ... Cancellation of petitioner’s GST registration - SCN did not specifically stated the reason for cancellation - Suppression of facts - HELD THAT:- Concededly, the SCN did not specifically stated the reason for proposing to cancel the petitioner’s GST registration. Although it was alleged that the GST registration was obtained by means of fraud, wilful misstatement, or suppression of facts, but the SCN did not provide any clue as to the alleged fraud committed by the petitioner or the wilful misstatement made by it. There is no indication as to the facts which are alleged to have been suppressed by the petitioner. It is trite law that a show cause notice is to respond to the allegation which form the basis of proposing an adverse action. In the present case, the SCN was incapable of eliciting any meaningful response. The impugned order is also bereft of any reason. It merely states that it is in reference to the SCN. In view of the above, the impugned order is liable to be set aside as it is void and not informed by reason. There are merit in the petitioner’s contention that once the petitioner’s GST registration was restored – which was cancelled on an allegation that it was obtained by fraud, misstatement or suppression of facts – it is not open for the respondent to again cancel the petitioner’s GST registration for the same reason unless it is premised on the ground that had occurred after the petitioner’s GST registration has been cancelled on 30.09.2021. The present petition is allowed and the impugned order is set aside and the petitioner’s GST registration is directed to be restored forthwith. Issues Involved:The judgment involves the cancellation of GST registration based on alleged fraud, wilful misstatement, or suppression of facts without proper reasoning in the show cause notice and subsequent order.Cancellation of GST Registration:The petitioner filed a petition challenging the cancellation of their GST registration by the respondent, citing an order passed on 26.10.2023, based on a Show Cause Notice (SCN) dated 18.09.2023. The SCN alleged registration obtained through fraud, wilful misstatement, or suppression of facts. However, the SCN lacked specific details regarding the alleged fraud or misstatement, rendering it insufficient for a meaningful response. The impugned order, devoid of any reasoning, merely referenced the SCN, leading to its setting aside for being void and unreasonable.Procedural Irregularities:The petitioner's counsel highlighted a prior Show Cause Notice dated 20.09.2021, proposing the same cancellation reasons as the later SCN. Subsequently, the petitioner's GST registration was canceled on 30.09.2021, and an appeal against this decision was rejected due to delay. Following an application for revocation, the registration was restored on 16.09.2023. The court noted the merit in the argument that once registration is restored, re-cancellation for the same reason is impermissible unless new grounds arise post the initial cancellation.Judgment and Relief:The court allowed the petition, setting aside the impugned order and directing the restoration of the petitioner's GST registration. All pending applications were disposed of, with a clarification that the respondent could take lawful steps as per the statute. The judgment emphasized the importance of providing proper reasoning in show cause notices and orders, ensuring transparency and fairness in administrative actions.