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Issues: (i) Whether registration under the CGST/HGST Act can be cancelled with retrospective effect despite the show cause notice not proposing retrospective cancellation; (ii) Whether proceedings are vitiated where supportive documents stated to be attached to the show cause notice were not supplied to the taxpayer; (iii) Whether cancellation orders that are cryptic and non-speaking are sustainable.
Issue (i): Whether retrospective cancellation of GST registration may be effected where the show cause notice does not propose retrospective cancellation.
Analysis: Section 29 of the Central Goods and Services Tax Act, 2017 confers a power to cancel registration, including from a retrospective date, subject to the contingencies listed therein. The statutory scheme and subordinate rules (notably Rule 22) require that the affected person be put on notice and afforded opportunity of hearing. Established principles of fair procedure require that a show cause notice disclose the grounds and the nature of the proposed action so that the person can meet the case against them. Retrospective cancellation has significant consequences and therefore the order exercising such power must reflect consideration of facts and reasons; retrospective effect cannot be mechanically or routinely applied without reasons shown in the order and notice.
Conclusion: Retrospective cancellation is permissible in law but may not be validly imposed unless the show cause notice clearly proposes it and the order records reasons demonstrating application of mind; in the present matters retrospective cancellation effected without such proposal or reasons is unsustainable.
Issue (ii): Whether non-supply of supportive documents, which were stated in the show cause notice to be attached, vitiates the proceedings.
Analysis: Rule 22 and the principles of natural justice require that material relied upon in initiating cancellation proceedings be made available so that the taxpayer can effectively respond. Where the show cause notice expressly refers to attached supporting documents and those documents are not furnished or uploaded, the affected person is deprived of the opportunity to meet the case. The Court noted the admitted absence of such documents in these matters and that departmental reliance on materials not mentioned in the order or supplied at the show cause stage cannot cure the defect.
Conclusion: Proceedings are vitiated if supportive documents referred to in the show cause notice are not supplied to the taxpayer; failure to supply such material renders the proceedings unsustainable.
Issue (iii): Whether cancellation orders that are cryptic and non-speaking, lacking reasons and demonstration of application of mind, are sustainable.
Analysis: An order cancelling registration, particularly with retrospective effect, must disclose the reasons and demonstrate application of mind to the facts and material. Non-speaking, cyclostyled or cryptic orders that merely reproduce bare grounds or refer to unsupplied documents do not fulfil the statutory and procedural requirement of reasoned decision-making. Post hoc justifications by the department in replies cannot substitute for a reasoned order and cannot validate a non-speaking cancellation order.
Conclusion: Cryptic and non-speaking cancellation orders that do not record reasons and application of mind are unsustainable.
Final Conclusion: The writ petitions challenging the cancellation orders are allowed; the impugned show cause notices and cancellation orders are set aside to the extent they effect retrospective cancellation without proper proposal, supply of supporting material and reasoned orders; authorities may re-initiate or continue action only after affording proper notice, supplying supporting material and providing an opportunity of hearing, and by passing reasoned orders in accordance with law.
Ratio Decidendi: While the statutory power to cancel GST registration, including with retrospective effect, exists, its exercise requires that the show cause notice disclose the proposed action (including any retrospective date) and the material relied upon, the supporting documents referred to must be supplied to the taxpayer, and the cancellation order must be reasoned and demonstrate application of mind; failure in these respects renders the cancellation unsustainable.
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