CGST Authority orders revoking voluntary registration cancellation quashed for violating natural justice principles

Bombay HC quashed CGST Authority orders dated 20 February 2024, 8 March 2024 and 9 May 2024 that revoked petitioner's voluntary registration cancellation. The court held that revocation orders violated natural justice principles, making subsequent proceedings consequential and invalid. Registration cancellation was restored with effect from 8 May 2023 as originally accepted. However, petitioner was restrained from utilizing input tax credit for reasonable period to allow authorities to conclude proceedings, balancing both parties' interests despite petitioner's conduct being disapproved for overlooking show cause notice.

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Issues:
Challenge to order revoking voluntary cancellation of registration and subsequent cancellation with retrospective effect.

Analysis:
The petition challenged the revocation of voluntary cancellation of registration and subsequent cancellation with retrospective effect by the Central Goods and Services Tax (CGST) Authority. The petitioner voluntarily applied to cancel the registration, which was accepted, but later revoked without a show cause notice. The court found that the restoration of cancellation without a show cause notice violated principles of natural justice. The rejection of the application for cancellation lacked reasons, indicating a lack of application of mind. The subsequent show cause notice for cancellation did not explain the retrospective effect or provide reasons for the same. The court held that the decision-making process leading to the impugned action was flawed.

The court noted that the registration was granted in June 2021 but was cancelled retrospectively from June 2020, without explanation. The lack of disclosure of documents supporting the rejection of the cancellation application before revocation also violated principles of natural justice. The court quashed the orders passed by the CGST Authorities and restored the position as of the date of acceptance of the cancellation application. The respondents were directed to issue a show cause notice for revocation of registration and conclude proceedings by a specified date. The petitioner was restrained from utilizing any Input Tax Credit (ITC) until the conclusion of proceedings to balance the interests of both parties.

In conclusion, the court set aside the impugned orders due to the flawed decision-making process, granting respondents the liberty to proceed in accordance with the law. The petitioner was given the right to challenge any future orders. The court disposed of the petition without imposing any costs.

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