GST Registration Cancellation Overturned: Procedural Flaws Invalidate Order, Emphasizing Natural Justice and Proper Investigative Protocols

HC found the GST registration cancellation order invalid due to procedural irregularities. The SCN lacked specific fraud allegations and violated natural justice principles. The retroactive cancellation without proper justification was set aside. HC directed immediate restoration of GST registration and allowed authorities to initiate fresh proceedings in compliance with legal standards, emphasizing the importance of providing detailed reasons and ensuring fair opportunity to respond.

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Issues:
Impugning a Show Cause Notice and Cancellation Order regarding GST registration.

Analysis:
The petitioner challenged a Show Cause Notice (SCN) dated 19.05.2023 and a subsequent Cancellation Order dated 20.06.2023 regarding the cancellation of their GST registration. The SCN cited Section 29(2)(e) of the CGST Act, 2017, alleging registration obtained through fraud, wilful mistreatment, or suppression of facts. The petitioner's GST registration was suspended, and they were given seven days to respond. However, the SCN lacked specific details of the alleged fraud or misstatement, violating principles of natural justice by not providing adequate opportunity to respond.

The subsequent Cancellation Order did not provide reasons for the cancellation apart from referencing the earlier SCN. The cancellation was made retroactively from 24.07.2019, without prior indication in the SCN. This order was deemed a violation of natural justice principles, necessitating its setting aside. The petitioner later applied for revocation, leading to another SCN on 21.07.2023, alleging ineligible credit availed from a non-existent firm and passing on Input Tax Credit (ITC) amounting to a significant sum.

Despite the petitioner's response to the subsequent SCN, their application for revocation was rejected on the grounds of unsatisfactory replies. The Court noted discrepancies between the allegations in the SCN and subsequent proceedings, including accusations of availing ITC from a non-existent firm and being non-functional, not mentioned in the original SCN. The Court set aside the cancellation order, directing immediate restoration of the petitioner's GST registration while allowing the proper officer to initiate fresh proceedings in compliance with the law.

Furthermore, the Court clarified that the respondents could pursue statutory non-compliance or recovery of dues through lawful proceedings, emphasizing adherence to legal processes. The judgment highlighted the importance of providing detailed reasons in show cause notices, ensuring the right to be heard and respond adequately before adverse actions are taken, thereby upholding principles of natural justice throughout the legal proceedings.

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