Registration cancellation orders quashed due to vague show cause notice lacking material basis for fraud allegations

The Bombay HC quashed orders cancelling petitioner's registration, holding the show cause notice was extremely vague and failed to disclose material basis for alleging fraud or willful misstatement. The notice merely replicated statutory language without furnishing the Deputy Commissioner's letter, denying petitioner fair opportunity to respond and constituting gross breach of natural justice. The appellate authority's failure to consider these contentions rendered the appeal order vulnerable. Court granted liberty to respondents to issue fresh show cause notice within four weeks with relevant material, directing disposal within four weeks of response with mandatory personal hearing and reasoned order. Petitioner undertook not to utilize accumulated ITC for three months.

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The Bombay High Court, per M. S. Sonak, J., quashed and set aside the impugned Order-in-Original dated 7 February 2022 and Order-in-Appeal dated 28 March 2024, which cancelled the Petitioner's registration. The Court held that the show cause notice dated 15 January 2022 was "extremely vague" and failed to disclose the material basis for alleging fraud, willful misstatement, or suppression of facts, merely replicating statutory language without furnishing the Deputy Commissioner A.E's letter relied upon in the cancellation order. This omission denied the Petitioner a fair opportunity to meet the allegations, constituting a "gross breach of natural justice." The appellate authority's failure to consider these crucial contentions rendered the appeal order "vulnerable."The Court granted liberty to the Respondents to issue a fresh show cause notice within four weeks, accompanied by relevant material, and directed disposal within four weeks of the Petitioner's response. A personal hearing must be granted, and the final order must be reasoned and communicated. The Petitioner undertook not to utilize the accumulated Input Tax Credit (ITC) for three months, which the Court accepted as an undertaking binding on the Petitioner. Both parties were directed to adhere strictly to the prescribed timelines, with the Petitioner refraining from seeking undue adjournments and the Respondents avoiding unnecessary delays. The Rule was made absolute without costs.

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