2025 (9) TMI 179 - HC - GST

Petition rejecting challenge to GST registration cancellation for lack of documentary evidence; seek statutory remedies under Section 122 CGST Act

M/s Jay Laxmi Industries Through Its Proprietor Jigneshbhai Jashwant Lal Raval Versus Union of India Through The Office of The Commissioner CGST And Central Excise And Others

M/s Jay Laxmi Industries Through Its Proprietor Jigneshbhai Jashwant Lal Raval Versus Union of India Through The Office of The Commissioner CGST And ... ISSUES PRESENTED AND CONSIDERED 1. Whether a writ petition under Article 226 is maintainable to challenge a final order of cancellation of GST registration when a statutory appeal under the GST statute (Section 107) is available. 2. Whether cancellation of GST registration with retrospective effect is permissible under Section 29(2) of the CGST Act, 2017, and related Rules (Rule 21 and Rule 25 of the CGST Rules, 2017), including requirements of issuance of show cause notice and opportunity for personal hearing. 3. Whether failure to receive or file a reply to a show cause notice via the common portal (electronic non-access) constitutes sufficient cause to set aside the cancellation order for want of procedural compliance. 4. Whether non-compliance with prescribed form or particulars of the show cause notice (e.g., not issuing GST REG-17 in prescribed format or not specifying date/time for personal hearing) vitiates the cancellation proceedings. 5. Whether allegations based on analytics/risk data (DG-ARM) and prior cancellation in another State justify cancellation and subsequent recovery proceedings under Section 122. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of writ under Article 226 when statutory appeal exists Legal framework: Article 226 confers jurisdiction on High Courts to issue writs; statutory scheme provides an alternative remedy of appeal under Section 107 of the CGST Act against cancellation orders. Precedent Treatment: The Court relied on Supreme Court authority emphasizing that when an efficacious statutory remedy exists, courts should ordinarily refrain from exercising writ jurisdiction and relegate parties to the statutory appellate remedy. The Court also noted other authorities recognizing exceptions but did not find such exceptions applicable on the facts. Interpretation and reasoning: The Court held that an appeal avenue was available and operable; the petitioner had not availed it within the time-limits nor shown sufficient reason to bypass the statutory remedy. Judicial prudence and established precedent require relegation to the statutory appellate forum where factual disputes and a dedicated appeal mechanism exist. Ratio vs. Obiter: Ratio - Where a specific statutory appeal is available against an administrative adjudication (here, cancellation of registration), the High Court will normally dismiss a writ invoking Article 226 and direct the party to pursue the statutory appeal. Obiter - Reference to other decisions permitting writs in exceptional circumstances was discussed but not applied. Conclusion: Writ petition dismissed on maintainability grounds; petitioner permitted to file an appeal against the cancellation order. Issue 2: Validity of retrospective cancellation under Section 29(2) and adherence to Rule 21/Rule 25 Legal framework: Section 29(2) empowers the Proper Officer to cancel registration if specified conditions (including fraud, non-existence at declared place, issuance of invoices without supply) are satisfied; Rules 21 and 25 prescribe procedural aspects for issuance of show cause notices and personal hearings. Precedent Treatment: The Court acknowledged several High Court decisions criticizing retrospective cancellations and emphasizing strict compliance with Rule 25 (personal hearing). However, the Court did not find the cited authorities decisive in the present facts because the petitioner had not engaged with the proceedings or produced material contradicting the authority's findings. Interpretation and reasoning: The Court observed that Section 29(2) expressly grants power to cancel registration with retrospective effect if conditions are made out. Procedural safeguards (notice and opportunity of hearing) must be respected, but the petitioner failed to avail available opportunities to respond. The authority's invocation of data from risk analytics and prior findings was a permissible basis to initiate proceedings under Section 29(2). Ratio vs. Obiter: Ratio - Cancellation with retrospective effect is permissible under Section 29(2) where statutory conditions are established and procedural safeguards are observed; absence of compliance with Rule 25 can vitiate proceedings but must be substantiated by the affected party. Obiter - Discussion of various High Court rulings condemning retrospectivity was noted but not treated as preventing retrospective cancellation per se. Conclusion: Retrospective cancellation is not inherently invalid; where conditions under Section 29(2) are alleged and the petitioner fails to contest those allegations or to show procedural non-compliance prejudicially, the cancellation order stands subject to appellate review. Issue 3: Effect of electronic non-access (failure to open common portal) on opportunity to be heard Legal framework: Principles of natural justice require notice and opportunity to be heard; procedural rules contemplate electronic service and response through the common portal, with specified timeframes for reply and rectification. Precedent Treatment: Petitioner's reliance on authorities setting aside cancellations for lack of personal hearing or defective notice was acknowledged. The Court, however, emphasized that non-availability of portal access is not an automatic justification; the onus is on the taxpayer to avail response mechanisms or to seek extension/rectification promptly. Interpretation and reasoning: The Court found that the petitioner did not attempt to file a reply, did not provide documentary evidence of inability to access the portal, and failed to seek rectification within the post-order window. Mere assertion of portal non-access without contemporaneous steps or proof does not negate the opportunity to be heard or invalidate the final order. Ratio vs. Obiter: Ratio - Electronic non-access, standing alone and unsupported by proof of effort or steps to remedy, does not automatically vitiate proceedings; the affected party must demonstrate denial of reasonable opportunity to be heard. Obiter - Courts may set aside orders where procedural irregularity is proved to have caused prejudice. Conclusion: Failure to open the portal and non-submission of reply without proof of inability is not sufficient to overturn the cancellation; petitioner's remedy is to pursue the statutory appeal or other remedies. Issue 4: Defects in form/contents of show cause notice and absence of specific date/time for personal hearing Legal framework: Rules prescribe the manner and form of notices (including prescribed formats like GST REG-17) and requirement of personal hearing (Rule 25) where applicable, to satisfy principles of natural justice. Precedent Treatment: Several High Court decisions were cited by the petitioner where cancellation orders were set aside for failure to grant personal hearing or for defective notices. The Court recognized their existence but examined applicability to the facts. Interpretation and reasoning: The Court held that objection to form or omission of specific date/time must be shown to have caused prejudice or resulted in denial of an effective hearing. Here, the petitioner neither replied nor produced evidence that they were prevented from seeking a hearing or that the notice was so defective as to deprive them of any real opportunity to respond. Post-order rectification and appeal remedies remained available but were not pursued. Ratio vs. Obiter: Ratio - Non-compliance with prescribed notice/formalities can invalidate proceedings if it results in denial of meaningful opportunity to be heard; however, absence of specific date/time is not automatically fatal unless prejudice is demonstrated. Obiter - Emphasis on strict compliance with Rule 25 where the facts warrant. Conclusion: The alleged defects in notice/form did not, on the record, vitiate proceedings; petitioner failed to demonstrate prejudice or to exhaust available remedial mechanisms. Issue 5: Use of DG-ARM analytics and prior cancellation in another State as basis for proceedings and recovery under Section 122 Legal framework: Administrative authorities may act on data from risk analytics (DG-ARM) to initiate inquiries; Section 122 provides for show cause and recovery proceedings for tax and penalty where offenses are found. Precedent Treatment: The Court accepted that receiving lists from DG-ARM can form the basis for issuing show cause notices and initiating cancellation; prior adverse findings in another jurisdiction are relevant facts for the authority to consider. Interpretation and reasoning: The Court observed that the present proceedings originated from DG-ARM risk assessment and that a prior cancellation in another State (Maharashtra) was an aggravating factor and relevant input for the jurisdictional officer. The existence of a subsequent show cause for recovery under Section 122 was noted as a continuing consequence following cancellation, which the petitioner must meet through statutory remedies. Ratio vs. Obiter: Ratio - Analytics-led identification of suspicious taxpayers and prior adverse orders in other jurisdictions justify initiation of cancellation and recovery proceedings, subject to statutory safeguards and appellate review. Obiter - The need for authorities to provide opportunity for explanation before concluding non-genuine transactions reiterated. Conclusion: Use of DG-ARM data and prior cancellations are lawful bases to initiate proceedings; they do not in themselves render the cancellation invalid absent demonstration of procedural denial or factual inaccuracy by the affected party.