2026 (2) TMI 824 - HC - GST

Notice Requirement: cancellation on unpleaded grounds invalid - fresh show cause with detailed reasons and reply opportunity required.

Cancellation of GST registration predicated on grounds not disclosed in the show cause notice was held invalid because a show cause notice must specify ... Show cause notice - cancellation of GST registration - deciding on grounds not pleaded in the show cause notice - circular trading - opportunity to reply / right to be heard - remand for fresh proceedings with detailed reasons - HELD THAT:- Factual position as above in respect to issuance of show cause notice dated 16.06.2021 for cancellation of petitioner’s registration on the premise of it having been obtained by means of fraud willful mis-statement/ suppression of facts and passing of order dated 16.06.2021 cancelling petitioner’s registration on the ground of it being involved in circular trading etc. is a matter of record and not denied. It is a settled position that a show cause notice is the foundation of further proceedings. An opportunity has to be afforded to the noticee to answer and show cause but in case a particular issue has not even been mentioned in the show cause notice, the assessee/noticee has no occasion to respond. Thus, to pass an order on the basis of a premise which has not even been put to the assessee in the show cause notice is clearly unjustified. Such an order is unsustainable. Writ petition allowed. Issues: Whether cancellation of GST registration and its appellate confirmation are vitiated where the show cause notice did not specify the ground on which cancellation was ultimately ordered, and whether the impugned orders must be set aside with liberty to issue a fresh show cause notice stating detailed reasons.Analysis: The proceedings record that the show cause notice was issued on the premise of registration obtained by fraud, willful misstatement or suppression of facts, whereas the cancellation order proceeded on the basis of circular trading and non-payment of tax. The appellate order did not adjudicate the specific contention that the cancellation relied upon a ground not pleaded in the show cause notice but merely observed that the ground was permissible under Section 29(2) of the Act. Prior final decision in a connected matter where identical procedural defect existed resulted in setting aside the appellate order and directing issuance of a fresh show cause notice with detailed reasons so the noticee could respond and speaking orders be passed. A show cause notice is foundational to subsequent adjudication and must disclose the grounds relied upon so that the noticee has an opportunity to reply; passing orders on unpleaded grounds denies that opportunity and is unsustainable.Conclusion: Impugned cancellation and appellate orders are set aside; liberty is granted to the department to initiate fresh proceedings by issuing a show cause notice specifying detailed reasons, permitting the noticee to file a reply, and thereafter passing appropriate speaking orders.Ratio Decidendi: An order cancelling GST registration premised on grounds not disclosed in the show cause notice is invalid for denial of the statutory requirement of fair opportunity to answer, and a fresh show cause process with detailed reasons must be afforded before passing speaking orders.