GST registration cancellation treated as suspension pending fresh adjudication after prior reply and hearing requirement

GST registration cancellation based on inspection and alleged ineligible input tax credit was treated as a suspension pending fresh adjudication where the record suggested a prior reply had been sent before the impugned order. The authority was required to consider that reply on merits, grant an opportunity of hearing, and pass a fresh order in accordance with law within the stipulated time. The department's power to proceed further, including tax recovery and penalty proceedings, was preserved, but the cancellation was not to operate finally until de novo consideration was completed.

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Issues: (i) Whether the order cancelling the GST registration could be treated as a suspension pending fresh adjudication in view of the claimed prior reply and the pending inquiry. (ii) Whether the petitioner's reply was required to be considered on merits before passing the final order.

Issue (i): Whether the order cancelling the GST registration could be treated as a suspension pending fresh adjudication in view of the claimed prior reply and the pending inquiry.

Analysis: The petition was filed against cancellation of GST registration based on inspection and alleged ineligible credit. The record indicated that a reply had been kept in the typed set and was stated to have been sent before the impugned order. In the circumstances, and having regard to the proposed proceedings relating to tax recovery and penalty, the cancellation order was directed to be treated as a suspension of registration pending fresh consideration.

Conclusion: The cancellation order was converted into a suspension of GST registration pending de novo adjudication.

Issue (ii): Whether the petitioner's reply was required to be considered on merits before passing the final order.

Analysis: The reply said to have been sent before the impugned order was to be taken into account and disposed of in accordance with law. The Authority was required to hear the petitioner before passing the final order and decide the matter on merits within a stipulated time.

Conclusion: The reply was required to be considered on merits after granting an opportunity of hearing.

Final Conclusion: The writ petition resulted in protective relief to the petitioner by converting the cancellation into a suspension and directing fresh adjudication after hearing the petitioner.

Ratio Decidendi: Where a cancellation of GST registration is challenged and a prior reply appears to have been sent before the impugned order, the matter may be directed for fresh adjudication on merits with interim treatment of the cancellation as a suspension, while preserving the department's power to proceed in accordance with law.

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