2025 (5) TMI 1276 - HC - GST

GST Registration Cancellation Voided Due to Procedural Flaws and Fabricated Documents Under Section 29

M/s. Royal Enterprises Versus Principal Commissioner Of Goods And Service Tax East Delhi.

M/s. Royal Enterprises Versus Principal Commissioner Of Goods And Service Tax East Delhi. - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter include:(a) Whether the Department had the authority to cancel the GST registration of the Petitioner retrospectively, specifically with effect from a date prior to the issuance of the Show Cause Notice (SCN);(b) Whether the SCN issued by the Department complied with the principles of natural justice, including the requirement of providing adequate reasons and prior notice for retrospective cancellation;(c) Whether the SCN annexed by the Petitioner in the writ petition was a true and unaltered document or a fabricated one;(d) The implications of the alleged fabrication of the SCN on the validity of the writ petition and the earlier order passed by the Court;(e) The appropriate course of action upon discovery of the fabrication, including recall of the earlier order and directions for further proceedings.2. ISSUE-WISE DETAILED ANALYSIS(a) Authority for Retrospective Cancellation of GST RegistrationThe Department issued a SCN dated 27th September 2024 proposing cancellation of the Petitioner's GST registration. Subsequently, an order dated 22nd October 2024 was passed cancelling the registration with effect from 25th November 2021, thereby applying the cancellation retrospectively.The Petitioner challenged this retrospective cancellation on the ground that the SCN did not specify any reasons for such retrospective effect, and no prior notice was given about the intent to cancel registration retrospectively.The Court examined the relevant legal framework governing GST registration cancellation, which mandates that any cancellation must be supported by clear reasons and adherence to procedural fairness. The Court relied on precedents including a recent decision in a similar matter, which emphasized that retrospective cancellation without explicit reasons and prior notice violates principles of natural justice.Applying these principles, the Court held that the absence of reasons in the SCN and failure to inform the Petitioner about retrospective cancellation invalidated the Department's action. The Court modified the cancellation order to take effect only from the date of the SCN, i.e., 27th September 2024.(b) Compliance with Principles of Natural Justice in Issuance of SCNThe SCN is a critical document that initiates the process of cancellation and must contain detailed reasons for the proposed action. The Court scrutinized the SCN annexed by the Petitioner (Annexure P-1) and found it lacking in reasons supporting retrospective cancellation.This deficiency was central to the Court's initial decision to allow the writ petition and modify the cancellation order.(c) Fabrication of the SCN and its ConsequencesSubsequent to the Court's order, the Department filed an application alleging that the SCN annexed by the Petitioner was fabricated. It was contended that a substantial portion of the SCN containing reasons was deleted in the version placed before the Court.The Department produced the original SCN uploaded on the official portal, which contained the omitted reasons, contradicting the version annexed by the Petitioner.The Petitioner's counsel admitted that the SCN annexed in the writ petition was provided by the Petitioner and that he was unaware of the fabrication. This admission underscored the seriousness of the misconduct.Further, the Department revealed that similar fabrications were detected in three other writ petitions, all represented by the same counsel for the Petitioners, indicating a pattern of submission of altered documents.(d) Impact of Fabrication on Earlier Court Order and ProceedingsThe Court considered the implications of the fabrication on the integrity of the judicial process and the validity of the earlier order modifying the cancellation date.Given that the earlier order was based on an incomplete and altered SCN, the Court found it necessary to recall that order to preserve the sanctity of judicial proceedings.The Court directed that any effect given to the earlier order should be withdrawn and that the matter be relisted for fresh consideration in light of the correct SCN and the admitted fabrication.(e) Directions for Further Proceedings and Ensuring ComplianceThe Court issued directions to ensure proper adjudication of the matter and to address the broader issue of multiple petitions involving similar fabrications:- The final order dated 27th February 2025 was recalled and any consequential actions were to be stayed.- The proprietor of the Petitioner was directed to appear in Court on the next date to explain the circumstances surrounding the fabrication.- The Registry was instructed to list the present writ petition along with the three other writ petitions involving similar issues before the Court on the next date.- The counsel representing the Petitioners in all four matters was directed to inform the Petitioners to ensure their presence.3. SIGNIFICANT HOLDINGSThe Court's crucial legal reasoning is encapsulated in the operative portion of the order dated 27th February 2025, which was initially passed but later recalled due to fabrication:'In view of the above and when the impugned order is tested on the aforenoted precepts, it becomes apparent that absence of reasons in the original SCN in support of a proposed retrospective cancellation as well as a failure to place the petitioner on prior notice of such an intent clearly invalidates the impugned action. We are thus of the considered opinion that the writ petition is entitled to succeed on this short ground alone.'This principle underscores the necessity of transparency and procedural fairness in administrative actions affecting statutory registrations.However, the subsequent discovery of fabrication led to the significant holding that submission of altered documents to the Court vitiates the judicial process and warrants recall of orders based on such documents.The Court's final determination includes:- Retrospective cancellation of GST registration requires clear reasons and prior notice; absence thereof invalidates such cancellation.- Fabrication of documents submitted to the Court is a serious misconduct that undermines the administration of justice.- Orders passed on the basis of fabricated documents must be recalled to maintain judicial integrity.- The affected parties and their representatives must be held accountable and made to appear before the Court for explanation.