Procedural Flaws Invalidate GST Registration Cancellation, Emphasizing Taxpayer's Right to Fair Notice and Hearing Under Rule 21

HC found the GST registration cancellation order invalid due to procedural deficiencies. The Show Cause Notice lacked specific details about non-filing of returns, and the retrospective cancellation from registration date was improper. The court set aside the order, directing tax authorities to follow proper legal procedures, provide specific notice, and ensure the taxpayer's right to be heard before any retrospective cancellation.

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Issues involved: Impugned order cancelling GST registration with retrospective effect based on failure to furnish returns for a continuous period of six months without providing specific details in the Show Cause Notice.

Judgment Summary:

Issue 1: Lack of Specific Details in Show Cause Notice
The petitioner challenged the order cancelling their GST registration with retrospective effect, arguing that the Show Cause Notice lacked specific details regarding the failure to furnish returns for a continuous period of six months. The Court noted that the Show Cause Notice did not provide particulars or details, and appeared to extract the reason in a standard format. The absence of specific information in both the Show Cause Notice and the impugned order rendered them unsustainable.

Issue 2: Retrospective Cancellation of Registration
The Court highlighted that the impugned order sought to cancel the registration retrospectively from the date of its registration on 01.07.2017 without providing any reasons for such retrospective action. It was emphasized that registration cannot be cancelled with retrospective effect mechanically, and the proper officer must base such a decision on objective criteria. The Court noted that the petitioner was not informed in the Show Cause Notice about the retrospective cancellation, depriving them of the opportunity to object to it.

Issue 3: Consideration of Consequences
Addressing the consequences of cancelling a taxpayer's registration with retrospective effect, the Court stated that the denial of input tax credit to the taxpayer's customers should be considered by the proper officer before making such a decision. While not delving into this aspect in detail, the Court emphasized that any cancellation with retrospective effect must be intended and warranted, ensuring compliance with the law.

In conclusion, the Court set aside the Show Cause Notice and the Impugned Order, allowing the respondent to take further action in accordance with the law, including cancellation of registration with retrospective effect. However, such actions must be accompanied by a proper Show Cause Notice and an opportunity for the petitioner to be heard. The respondents were also permitted to pursue recovery of any tax, penalty, or interest due from the petitioner in accordance with the law. The petition was disposed of accordingly.

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