GST registration cancellation orders set aside due to lack of detailed reasoning and due process violations

Delhi HC set aside GST registration cancellation orders dated 09.02.2023, 14.12.2023, and 14.03.2024, finding the Show Cause Notice and impugned orders lacked details and cogent reasons for retrospective cancellation. The court noted that retrospective cancellation prevented petitioner from accessing the online portal to receive notices, violating due process. GST registration was restored with directions for necessary compliance and filing requisite returns. The matter was remitted to the Proper Officer for re-adjudication, emphasizing the requirement for detailed reasoning in cancellation proceedings.

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Issues involved:
The cancellation of GST registration retrospectively, issuance of Show Cause Notices, rejection of applications for condonation of delayed reply, incorrect tax liability declaration, and non-functional status of the petitioner's firm.

Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was done without providing specific reasons and without giving the petitioner an opportunity to object to the retrospective cancellation. The order for cancellation lacked clarity and coherence, leading to confusion about the grounds for cancellation. The court noted that the registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The consequences of cancelling registration with retrospective effect, such as denying input tax credit to customers, must be considered before making such a decision. The court found the retrospective cancellation unjustified and set aside the impugned orders, restoring the petitioner's GST registration.

Show Cause Notices and Incorrect Tax Liability Declaration:
The petitioner received Show Cause Notices regarding non-compliance and incorrect tax liability declaration. The notices lacked details and reasons for the actions proposed. The petitioner provided a detailed reply addressing the issues raised in the notices. The court observed that the lack of specifics in the notices rendered them unsustainable. The matter was remitted to the Proper Officer for re-adjudication, directing the petitioner to respond to the Show Cause Notice within a week for a fair re-evaluation.

Rejection of Applications for Condonation of Delayed Reply:
The applications for condonation of delayed reply and revocation of cancellation of registration were rejected by the authorities citing reasons related to the unavailability of the taxpayer's accountant and lack of clear reasons for the delay. The rejection was based on field visit reports indicating non-functionality of the firm. The court found the rejection unjustified and set aside the orders, directing the restoration of the petitioner's GST registration.

Non-Functional Status of Petitioner's Firm:
There was a discrepancy regarding the functional status of the petitioner's firm during a field visit. While the authorities claimed non-functionality, the petitioner argued that the cancellation of registration prevented business operations. The court acknowledged this discrepancy and emphasized the importance of clear communication and proper evaluation in such cases.

Conclusion:
The High Court set aside the impugned orders related to the cancellation of GST registration and rejection of applications, restoring the petitioner's registration. The matter was remitted for re-adjudication with specific directives for compliance and fair evaluation. All rights and contentions of the parties were reserved.

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