Ex Parte GST Registration Cancellation Set Aside for Lack of Personal Notice and Natural Justice Violation

The HC set aside the ex parte cancellation of the petitioner's GST registration, finding a violation of natural justice as no personal notice was served and the petitioner had ceased business before the cancellation date. The matter was remanded to the assessing authority for fresh consideration. The petitioner was allowed 15 days to respond to the show cause notice, and the authority was directed to provide a hearing before passing a new order.

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ISSUES:

Whether an ex parte order passed under Section 73 of the UPGST Act, 2017 can be sustained when the petitioner had applied for cancellation of registration prior to issuance of the show cause notice.Whether issuance of a show cause notice and passing of an order without providing an opportunity of hearing violates principles of natural justice.Whether cancellation of registration with retrospective effect precludes the tax authority from initiating proceedings for the period prior to cancellation.

RULINGS / HOLDINGS:

The Court held that once the petitioner had applied for cancellation of registration and the registration was cancelled with retrospective effect, "there was no occasion for the respondents to have issued the notice in the Additional Tab," and consequently, the ex parte order passed under Section 73 of the UPGST Act, 2017 "deserves to be quashed and set aside."The Court found that the issuance of the show cause notice and passing of the ex parte order without personal service or opportunity to be heard amounted to a violation of the "principles of natural justice."The retrospective cancellation of registration established that the petitioner "had gone out of business," and therefore, the tax authority's action for the period prior to cancellation was not justified without proper notice and hearing.

RATIONALE:

The Court applied the legal framework under Section 73 of the UPGST Act, 2017, which governs recovery of tax and related proceedings, emphasizing the need for adherence to procedural fairness.The Court relied on precedents including a coordinate bench decision in Chemsilk Commerce Pvt. Ltd., where similar circumstances led to setting aside of orders for violation of natural justice.The Court followed the principle that a cancellation of registration with retrospective effect negates the tax authority's jurisdiction to initiate proceedings for the cancelled period without proper notice.The judgment reflects a doctrinal emphasis on upholding principles of natural justice in tax proceedings, particularly where registration cancellation is involved.

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