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

HC found GST registration cancellation with retrospective effect unlawful. The order violated natural justice principles due to vague show cause notice and lack of proper hearing. Court set aside the impugned order, directed petitioner to file appeals within two weeks, and emphasized statutory remedies for challenging ITC denial and related tax disputes.

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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.

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