2024 (2) TMI 804 - HC - GST

GST registration cancellation order set aside for violating natural justice principles and procedural violations

M/s. JMCL Frames Versus Superintendent of Central Tax

Telangana HC allowed petition challenging GST registration cancellation. Court found the cancellation order dated 04.04.2022 violated natural justice ... Cancellation of GST Registration of petitioner - no reasons mentioned in impugned order which necessitated the issuance of the Order of Cancellation of Registration - violation of principles of natural justice - HELD THAT:- A plain perusal of the impugned order dated 04.04.2022 and the contents therein coupled with the statement of oath made by the learned counsel for the petitioner that the show cause dated 14.03.2022 was never served upon the petitioner nor has he submitted any reply to the said show cause notice on 24.03.2022 as has been contended by the authority, and also taking note of the fact that the impugned order does not make a reference of the contents of the reply, if any, submitted by the petitioner. To make things worse, the impugned order also does not disclose the grounds on which the authorities concerned were compelled to issue the cancellation of the registration. Therefore, the impugned order is liable to be interfered with this ground alone. Since the impugned orders have been passed without affording any opportunity of hearing to the petitioner, it is ordered that the impugned order dated 04.04.2022 itself be treated as a show cause notice and the petitioner may enter appearance before respondent No.1 and submit a detailed reply on or before 29.02.2024 - Petition allowed. Issues Involved:1. Validity of the Order for Cancellation of GST Registration.2. Principles of Natural Justice and Application of Mind.3. Precedents and Similar Judgments from Other High Courts.4. Directions for Remand and Restoration of Registration.Summary:1. Validity of the Order for Cancellation of GST Registration:The petitioner challenged the Order for Cancellation of Registration dated 04.04.2022, which canceled the petitioner's GST registration with effect from 01.08.2021. The order lacked reasons justifying the cancellation.2. Principles of Natural Justice and Application of Mind:The petitioner's counsel argued that the impugned order was passed without application of mind and without serving the show cause notice dated 14.03.2022 to the petitioner. The Department's counsel contended that the cancellation was due to the petitioner's default in furnishing returns for over six months. However, the court noted that the impugned order did not reference any reply from the petitioner or the grounds for cancellation, thus violating principles of natural justice.3. Precedents and Similar Judgments from Other High Courts:The court referenced several precedents, including:- Kritika Agarwal v. Union of India: Emphasized that GST cancellation should be exercised with circumspection.- Nirakar Ramchandra Pradhan v. Union of India: Highlighted the necessity of providing detailed reasons in show cause notices and orders, and quashed orders lacking such reasons.- Tvl. Sastha Engineering Works v. State Tax Officer: Directed the filing of returns and payment of taxes for periods before and after cancellation, and allowed restoration of registration upon compliance.4. Directions for Remand and Restoration of Registration:The court set aside the impugned order dated 04.04.2022, treating it as a show cause notice. The petitioner was directed to submit a detailed reply by 29.02.2024 and to file any pending returns with applicable late fees. The court clarified that the setting aside of the order would restore the petitioner's registration but restricted the use of unutilized Input Tax Credit until finalization of the show cause proceedings.Conclusion:The writ petition was allowed, the impugned order was quashed, and directions were given for remand and compliance to potentially restore the petitioner's GST registration. The court emphasized adherence to principles of natural justice and the necessity of detailed reasoning in administrative orders.