2025 (3) TMI 369 - HC - GST

Registration cancellation quashed due to defective show cause notice lacking factual details and violating natural justice principles

M/s. A1 Adil Traders Versus Deputy State Tax Officer

The Telangana HC allowed the petition challenging cancellation of petitioner's registration. The court found the show cause notice (SCN) dated 01.11.2024 ... Cancellation of registration of petitioner - whether the SCN provided sufficient reasons for the suspension and cancellation of registration? - Violation of principles of natural justice - HELD THAT:- In the instant case, the impugned show cause notice, in our opinion, runs contrary to the principles laid down by this Court in aforesaid W.P.No.20080 of 2024 [2024 (9) TMI 98 - TELANGANA HIGH COURT]. The departmental authorities must understand the difference between the ‘reasons’ and ‘conclusions’. Under the head ‘reasons’, infact departmental authorities have recorded their conclusion that the petitioner has breached certain Rules mentioned hereinabove. On what basis and on what factual details such violation has taken place is not spelled out. Thus, the impugned show cause notice which became foundation of issuance of impugned final order is bad in law. Since the foundation i.e., impugned show cause notice is cryptic and bad in law, the edifies standing of said cryptic notice by impugned final order also cannot sustain judicial scrutiny. The impugned show cause notice dated 01.11.2024 and consequential final order dated 16.01.2025 are set aside - petition allowed. The High Court considered a petition filed under Article 226 of the Constitution challenging a show cause notice dated 01.11.2024 suspending the petitioner's registration, and a final order of cancellation of registration dated 16.01.2025. The key issue was whether the show cause notice provided sufficient reasons for the suspension and cancellation of registration.The petitioner argued that the notice did not contain specific factual details or reasons for the alleged violations of rules, which was necessary for the petitioner to respond effectively. The court emphasized that the show cause notice should be specific and contain necessary details for the assessee to understand the allegations against them and respond adequately. The court referred to previous cases where similar notices lacking factual details were set aside due to non-compliance with principles of natural justice.The court highlighted the importance of providing a precise and unambiguous notice to enable the party to understand the case and make representations effectively. It cited precedents emphasizing the need for detailed factual backdrops in show cause notices to allow the assessee to respond appropriately. The court noted that the lack of necessary details in the notice rendered it vulnerable and liable to be set aside.Ultimately, the court set aside the impugned show cause notice dated 01.11.2024 and the final order dated 16.01.2025 due to the lack of essential factual details, violating principles of natural justice. The respondents were granted liberty to proceed against the petitioner in accordance with the law, emphasizing the importance of providing detailed reasons in such notices. The court clarified that its decision was based on procedural grounds and did not express any opinion on the merits of the case.In conclusion, the court's decision focused on the importance of providing specific and detailed reasons in show cause notices to ensure fairness and compliance with principles of natural justice. The judgment emphasized that vague or cryptic notices deprive the assessee of the opportunity to respond effectively, leading to the setting aside of the impugned notice and final order in this case.