GST Registration Wrongly Cancelled: Principles of Natural Justice Violated, Restoration Ordered Under Proper Hearing Mechanism

HC found the GST registration cancellation with retrospective effect unlawful. The cancellation violated natural justice principles as the petitioner was not given adequate opportunity to respond. Court directed restoration of GST registration for 30 days to enable return filing and allowed potential fresh show cause notice with proper hearing.

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Issues:
Challenge to cancellation of GST registration with retrospective effect; Failure to file returns leading to cancellation; Violation of principles of natural justice in cancellation process.

Analysis:
The petitioner challenged the cancellation of their GST registration with retrospective effect due to failure to file returns for a continuous period. The impugned SCN was issued, directing the petitioner to show cause, but the petitioner did not respond. The registration was cancelled with retrospective effect, and the petitioner's application for revocation was rejected as it was filed beyond the stipulated period. The court noted that cancellation with retrospective effect must be based on cogent reasons and informed by principles of natural justice. The cancellation order lacked reasons, violating natural justice principles.

The court referred to Section 29(2) of the CGST Act/DGST Act, which allows cancellation with retrospective effect based on specified conditions. However, it emphasized that such cancellations must be reasoned and not arbitrary. The court found the retrospective cancellation in this case to be in violation of natural justice principles as the petitioner had no opportunity to contest it. The court cited precedents where courts granted opportunities to remedy the cause of cancellation, emphasizing the severe consequences of GST registration cancellation on a taxpayer's business operations.

In light of the circumstances, the court directed the respondents to restore the petitioner's GST registration for thirty days to allow the filing of returns. If necessary, the proper officer could issue a fresh show cause notice and decide after a personal hearing. The order did not prevent further action for statutory violations. The petition was disposed of accordingly, and pending applications were also resolved.

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