2024 (8) TMI 1264 - HC - GST

Landmark GST Case: Retrospective Cancellation Overturned Due to Procedural Irregularities in Show Cause Notice

Ravi Versus Avato Ward 84 State Goods And Services Tax And Anr.

HC ruled in favor of the petitioner, invalidating the retrospective GST registration cancellation. The court found the Show Cause Notice deficient, ... Violation of principles of natural justice - vague SCN - no date or time was indicated in the impugned SCN for personal hearing - no proper reasons for cancellation mentioned in SCN - Cancellation of petitioner’s Goods and Services Tax (GST) registration with retrospective effect - petitioner found to be non-functioning / non-existing at the principal place of business - HELD THAT:- It is apparent that the impugned SCN is cryptic and does not set out any details for proposing to cancel the petitioner’s GST registration. It merely reproduces the statutory provision which enables the proper officer to cancel a tax payer’s GST registration if it is obtained by means of fraud, wilful misstatement or suppression of facts. The impugned SCN does not mention either the particulars or the nature of the alleged fraud. It does not mention any statement which is alleged to be a wilful misstatement or the facts which were allegedly supressed by the petitioner. It is also relevant to note that the impugned SCN does not propose the cancellation of the petitioner’s GST registration with retrospective effect - also, the impugned SCN also did not mention the date and time fixed for the personal hearing. The purpose of issuance of a show cause notice is to enable the noticee to respond to the allegations on the basis of which an adverse action is proposed. It is a fundamental rule of natural justice that a person must be afforded an opportunity to meet the allegations made against him. In the present case, the petitioner has been denied of that opportunity. The impugned order has been passed in violation of the principles of natural justice. The same is also unreasoned. Therefore, it is liable to be set aside. The impugned order is set aside. The respondents are directed to restore the petitioner’s GST registration forthwith. However, it is clarified that this order will not preclude the respondents from initiating any fresh proceedings for any statutory violation or for recovery of any dues - Petition allowed. Issues:Impugning the cancellation of Goods and Services Tax (GST) registration with retrospective effect.Analysis:The petitioner challenged an order cancelling their GST registration with retrospective effect. The petitioner had previously responded to a Show Cause Notice stating that their shop was temporarily closed due to family events and invited a fresh physical verification. Subsequently, the cancellation proceedings were dropped. However, a few months later, a new Show Cause Notice was issued, citing registration obtained through fraud, wilful misstatement, or suppression of facts as the reason for cancellation. The impugned Show Cause Notice lacked specific details regarding the alleged fraud, misstatement, or suppressed facts. It also failed to mention a date for the personal hearing, violating the principles of natural justice. The court held that the impugned order was passed in violation of natural justice principles and lacked reasoning, thus setting it aside and directing the restoration of the petitioner's GST registration.The court noted that the impugned Show Cause Notice did not meet the required standards as it did not provide specific details for proposing the cancellation of the petitioner's GST registration. It merely cited the statutory provision allowing cancellation in case of fraud, misstatement, or suppression of facts without specifying the particulars or nature of the alleged wrongdoing. Additionally, the notice did not mention a fixed date and time for the personal hearing, which is essential for a fair opportunity to respond to the allegations. The court emphasized that a proper show cause notice should enable the noticee to respond to the allegations and meet the principles of natural justice, which was lacking in this case.The court highlighted that the impugned Show Cause Notice's lack of specific details and failure to mention a date for the personal hearing rendered it inadequate and in violation of natural justice principles. As a fundamental rule, a person must be given an opportunity to address the allegations made against them. Since the impugned notice did not meet these standards, the court concluded that the subsequent order based on it was unreasonable and set it aside. The court directed the restoration of the petitioner's GST registration, clarifying that it does not prevent the authorities from initiating fresh proceedings for any violations or dues recovery in accordance with the law.