GST registration cancellation set aside for violating Rule 10A, Rule 21(d) and Rule 21A(2A) safeguards

HC quashed the order cancelling petitioner's GST registration for non-compliance with Rule 10A read with Rule 21(d) of the CGST Rules, 2017. The authority had issued a show-cause notice in an improper format and granted only seven working days to respond, contrary to Rule 21A(2A), which mandates a 30-day period. The Court held that when a statute prescribes a specific procedure, it must be strictly followed, and deviation violates principles of natural justice. As the petitioner was denied a proper and reasonable opportunity of being heard, the show-cause notice and cancellation order were set aside, and the writ petition was allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether cancellation of GST registration on the ground of violation of Rule 10A of the Central Goods and Services Tax Rules, 2017, was valid when the Show-Cause Notice was not issued in the prescribed form and the statutory time for reply was not granted.

1.2 Whether the order of cancellation of registration passed before expiry of the statutorily prescribed period violated the principles of natural justice and the mandatory procedure under the Central Goods and Services Tax Rules, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of cancellation based on non-compliance with Rule 10A where notice procedure under Rule 21A(2A) was not followed

Legal framework

2.1 Rule 10A of the Central Goods and Services Tax Rules, 2017 requires a registered person, within thirty days from the date of grant of registration, to furnish bank account details on the common portal.

2.2 Rule 21(d) provides that registration is liable to be cancelled if the person violates the provisions of Rule 10A.

2.3 Rule 21A(2A) prescribes the procedure where there is contravention of Rule 10A: the registration shall be suspended and the person shall be intimated in Form GST REG-31, electronically or on the common portal or by email, highlighting the non-compliance and asking the person to explain within a period of thirty days as to why registration should not be cancelled.

Interpretation and reasoning

2.4 The Court found that the Show-Cause Notice for cancellation of registration was issued in Form GST REG-17 instead of the statutorily mandated Form GST REG-31 under Rule 21A(2A).

2.5 Under Rule 21A(2A), in cases of non-compliance with Rule 10A, the noticee must be granted thirty days' time to explain the non-compliance and to show cause why the registration should not be cancelled.

2.6 In the impugned notice, only seven working days' time was granted to furnish a reply, and the registration was simultaneously suspended from the date of the notice, contrary to the requirement of affording thirty days.

2.7 The Court held that by not providing the mandatory thirty days' time and by using an incorrect statutory form, the authorities did not adhere to the procedure prescribed by the Rules and failed to comply with the principles of natural justice.

2.8 The Court reiterated the settled principle that where a statute prescribes that a particular act must be done in a particular manner, it must be done in that manner and in no other manner.

Conclusions

2.9 The Show-Cause Notice dated 10.06.2024 was held to be vitiated for (i) not being issued in Form GST REG-31 as mandated by Rule 21A(2A), and (ii) not granting the statutorily prescribed thirty days' period to show cause against cancellation.

2.10 The failure to follow the mandatory procedure under the Rules resulted in denial of a proper and reasonable opportunity of being heard, amounting to violation of principles of natural justice.

Issue 2: Validity of cancellation order passed before expiry of statutory period and its consequences

Interpretation and reasoning

2.11 The Court observed that, even after issuance of the defective Show-Cause Notice on 10.06.2024, the respondent did not wait for thirty days to lapse before passing the cancellation order.

2.12 The impugned order of cancellation was passed on 04.07.2024, i.e., before completion of thirty days from the date of the Show-Cause Notice, thereby compounding the breach of the mandatory scheme under Rule 21A(2A) read with Rule 10A.

2.13 Given these procedural irregularities, the subsequent inability of the petitioner to file an application for revocation of cancellation on the portal due to limitation was a consequence of the unlawful cancellation order and could not cure or validate the illegality.

Conclusions

2.14 The cancellation order dated 04.07.2024 was held unsustainable as it was passed without compliance with the mandatory notice procedure and before expiry of the statutorily prescribed period.

2.15 The Show-Cause Notice dated 10.06.2024 and the cancellation order dated 04.07.2024 were set aside and quashed.

2.16 As a consequential relief, the Court directed restoration of the petitioner's GST registration granted on 26.06.2023.

2.17 No order as to costs was made.

---