2024 (9) TMI 443 - HC - GST

GST Registration Cancellation Overturned: Procedural Flaws Expose Lack of Transparency in Tax Authority's Decision-Making Process

M/s. S.M. Trading Co. Versus Assistant Commissioner of Central Goods And Service Tax, Mandoli Division, East Delhi.

HC found GST registration cancellation invalid due to procedural irregularities. The cancellation order lacked specific reasons, violated natural justice ... Cancellation of petitioner’s Goods and Services Tax (GST) registration with retrospective effect - SCN does not set out any specific reason which was capable of eliciting a meaningful response - violation of principles of natural justice - HELD THAT:- The impugned order is unsustainable as it has been passed in gross violation of the principles of natural justice. The impugned SCN does not mention any reason for proposing to cancel the petitioner’s GST registration. It merely reproduces the statutory provision which enables the proper officer to cancel the taxpayer’s registration, if it is obtained by means of fraud, wilful misstatement or suppression of facts. The impugned SCN does not set out any particulars as to the alleged fraud or statement which is alleged to be a wilful misstatement. It provides no clue as to facts allegedly suppressed by the petitioner. The purpose of issuance of a show cause notice is to enable a noticee to meaningfully respond to the same. In the present case, the impugned SCN does not set out any specific reason which was capable of eliciting a meaningful response. In absence of any particulars as to the alleged fraud, wilful misstatement, or facts allegedly supressed, the petitioner cannot be expected to respond to the same. It is also not clear from the impugned SCN whether the allegation is one of obtaining registration by means of fraud or by wilful misstatement or by suppressing facts. It is also important to note that the impugned SCN did not propose any action for cancelling the petitioner’s GST registration with retrospective effect. The impugned order is liable to be set aside as having been passed in violation of the principles of natural justice - Petition allowed. Issues:Impugning cancellation of GST registration, violation of principles of natural justice, retrospective cancellation of registration, direction from Anti Evasion Branch, lack of specific reasons in Show Cause Notice.Analysis:The petitioner challenged the cancellation of their Goods and Services Tax (GST) registration with retrospective effect, citing violation of natural justice principles. The cancellation order was based on Section 29(2)(e) of the CGST Act, alleging fraud, wilful misstatement, or suppression of facts. The petitioner's registration was initially cancelled in September 2023 but later revoked. The impugned cancellation order in question was issued without specifying the alleged fraud or misstatement, hindering the petitioner's ability to respond meaningfully.The respondent claimed to have valid reasons for re-issuing the Show Cause Notice (SCN) based on a directive from the Anti-Evasion Branch. However, the impugned SCN lacked crucial details regarding the grounds for cancellation, making it impossible for the petitioner to address the allegations effectively. The cancellation order was deemed unsustainable due to the lack of specific reasons and the absence of any proposal for retrospective cancellation in the SCN.The High Court found that the cancellation order was passed without independent assessment by the proper officer and solely based on directions from another authority. The directive from the Anti Evasion Branch was not disclosed in the impugned SCN, further highlighting the procedural irregularities and violation of natural justice. Consequently, the court set aside the cancellation order and directed the restoration of the petitioner's GST registration without delay.In conclusion, the court allowed the petition, emphasizing the importance of adhering to natural justice principles in administrative actions. While the order restored the GST registration, it clarified that the respondent could pursue statutory violations or dues recovery through appropriate legal proceedings in the future. The judgment underscored the significance of providing specific grounds and ensuring due process in administrative decisions to uphold fairness and transparency.