Procedural Flaws Invalidate GST Registration Cancellation, Mandating Transparent Reassessment with Substantive Reasoning and Fair Hearing

The HC found the GST registration cancellation order invalid due to lack of specific reasons and procedural deficiencies. The retrospective cancellation was deemed unsustainable without objective criteria. The court set aside the order, directing the proper officer to re-examine the cancellation, provide detailed show cause notice, grant personal hearing, and adjudicate within two weeks with proper reasoning.

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Issues involved:
The issues involved in the judgment are the retrospective cancellation of GST registration, lack of specific reasons provided in the show cause notice, absence of proper details in the order of cancellation, and the necessity for objective criteria for cancellation with retrospective effect.

Impugned Show Cause Notice:
The petitioner challenged an order cancelling their GST registration retrospectively from 08.10.2021 and a show cause notice dated 06.01.2023. The notice lacked specific reasons for cancellation, only mentioning the possibility of fraud, wilful misstatement, or suppression of facts. It failed to provide details such as the officer's name or hearing location.

Order of Cancellation:
The order dated 28.02.2023 cancelling the registration did not provide sufficient reasoning. It mentioned non-appearance during a hearing as the basis for cancellation, without specifying any dues against the petitioner. The order was deemed inadequate as it did not clearly state the cancellation of registration or the reasons behind it.

Revocation Application:
The petitioner filed for revocation of the cancellation, but the subsequent show cause notice lacked appropriate reasons for revocation. The authorities rejected the application citing forged documents and non-existence on physical verification, without considering the petitioner's reply uploaded on the portal.

Legal Analysis and Decision:
The judgment highlighted that cancellation of GST registration with retrospective effect must be based on objective criteria, not merely due to non-filing of returns. The lack of reasoning in the show cause notice and the order of cancellation rendered them unsustainable. The court emphasized that cancellation with retrospective effect should consider the impact on the taxpayer's customers' input tax credit. Consequently, the order cancelling the registration was set aside, and the matter was remanded to the proper officer for re-adjudication in compliance with the law.

Final Disposition:
The court directed the proper officer to provide material supporting the show cause notice to the petitioner within one week, allowing the petitioner to respond within the same period. The officer was instructed to adjudicate the show cause notice within a maximum of two weeks after granting a personal hearing to the petitioner. The petition was disposed of with these directives for re-examination of the cancellation decision.

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