2024 (9) TMI 444 - HC - GST

Arbitrary GST Registration Cancellation Struck Down: Procedural Fairness Prevails in Landmark Ruling on Taxpayer Rights

Saluja Overseas Pvt. Ltd. Versus Commissioner of CGST And Central Excise Delhi East Commissionerate

HC found GST registration cancellation with retrospective effect unlawful. The order violated natural justice principles due to vague show cause notice ... Cancellation of petitioner’s Goods and Services Tax (GST) registration with retrospective effect - SCN directed the petitioner to appear before the concerned officer on the appointed date and time, but no such time or date was indicated in the impugned SCN - violation of principles of natural justice - HELD THAT:- It is material to note that the impugned SCN did not mention any proposal to cancel the petitioner’s GST registration with retrospective effect from the date when it was granted. Although, the impugned SCN directed the petitioner to appear before the concerned officer on the appointed date and time, but no such time or date was indicated in the impugned SCN. It is also material to note that the impugned SCN did not specify any particulars as to the allegations that the petitioner had collected the tax and had failed to deposit the same in the account of the Central / State Government beyond the period of three months. The impugned SCN did not mention any particulars as to the amount of tax collected or the transaction in respect of which the allegation is made. The impugned order cancelling the petitioner’s GST registration was passed in violation of the principles of natural justice. First, the petitioner was not afforded any opportunity of hearing as no date or time was fixed for such hearing. Second, the impugned SCN did not propose retrospective cancellation of the petitioner’s GST registration. And third, the impugned SCN did not contain any specific particulars as to the alleged collection and non-deposit of the tax or the transaction on which such allegation was premised. Plainly, the impugned SCN is vague and cryptic. The impugned SCN and the impugned order are set aside - Petition disposed off. Issues:1. Impugning the cancellation of Goods and Services Tax (GST) registration with retrospective effect.2. Violation of principles of natural justice in passing the impugned order.3. Denial of Input Tax Credit (ITC) based on retrospective cancellation of GST registration of a sister concern.4. Disputes arising from orders passed under Section 73 of the Central Goods and Services Tax Act, 2017/ the Delhi Goods and Services Tax Act, 2017.5. Entitlement to avail ITC on supplies where suppliers have not deposited tax on outward supplies.Analysis:1. The petitioner challenged the cancellation of their GST registration with retrospective effect from 01.07.2017. The impugned order was based on the petitioner's alleged failure to pay tax collected to the Central/State Government beyond three months. However, the High Court found the cancellation order to be in violation of natural justice as it lacked specific particulars and failed to propose retrospective cancellation in the Show Cause Notice (SCN).2. The High Court noted that the impugned SCN did not provide specific details regarding the alleged tax collection and non-deposit, rendering it vague and cryptic. The petitioner was not given an opportunity of hearing as no fixed date or time was mentioned. Consequently, the impugned order and SCN were set aside due to the violation of principles of natural justice.3. The petitioner's grievance stemmed from orders passed under Section 73 of the CGST Act/DGST Act, denying ITC based on the retrospective cancellation of the GST registration of a sister concern. The petitioner sought consequential relief following the setting aside of the sister concern's cancellation order in a separate case.4. The respondent contended that the petitioner was not entitled to avail ITC on supplies where the suppliers had not deposited tax on outward supplies, as per Section 16(2)(c) of the CGST Act/DGST Act. The petitioner disputed these allegations but failed to establish that tax on the supplies in question was deposited by the suppliers.5. The High Court directed the petitioner to file appeals against the disputed orders within two weeks for consideration by the appellate authority, without being influenced by any delay. The court emphasized the availability of statutory appeal as an efficacious remedy for the petitioner to challenge the denial of ITC and other related issues.This comprehensive analysis of the judgment highlights the key issues addressed by the High Court regarding the cancellation of GST registration, violation of natural justice, denial of ITC, disputes under Section 73 of the GST Acts, and the entitlement to avail ITC on supplies.