2021 (11) TMI 269 - HC - GST

Cancellation of registration of petitioner - opportunity of being heard not provided - principles of natural justice - HELD THAT - As the sanctity of a personal hearing before cancellation registration has been ingrained in first proviso to Section 29(2)(a), it is only appropriate that the writ petitioner is given a personal hearing. The II impugned order is set aside without expressing any opinion on the merits of the matter. To be noted, when this Court says I impugned order, it necessarily means impugned order wherein the quantum of ₹ 49,98,868/- has been scaled down to ₹ 24,75,183/- - application disposed off.

Summary

Issues:
1. Interpretation of Section 50 of CGST Act regarding Input Tax Credit.
2. Validity of cancellation of registration under Section 29(2)(a) of CGST Act.
3. Requirement of personal hearing before cancellation of registration.
4. Compliance with deposit condition for personal hearing.

Analysis:

Issue 1: Interpretation of Section 50 of CGST Act regarding Input Tax Credit
The case involves two writ petitions concerning Input Tax Credit (ITC) under the Tamil Nadu Goods and Service Act, 2017 and the Central Goods and Service Act, 2017. The petitioner, engaged in pressing and fabrication works, received a notice demanding a substantial sum towards ITC. Due to a legal change in Section 50 of the CGST Act, the demanded amount was reduced. Another notice was issued for the revised amount. The court noted the changes and implications of the legal provisions on the demanded sum.

Issue 2: Validity of cancellation of registration under Section 29(2)(a) of CGST Act
The second writ petition involved the cancellation of the petitioner's registration under Section 29(2)(a) of the CGST Act by the second respondent for alleged non-payment of the revised ITC amount. The petitioner contended that a personal hearing should have been provided before the cancellation. The court examined the provisions of Section 29(2)(a) and the requirement of giving an opportunity of being heard before canceling registration.

Issue 3: Requirement of personal hearing before cancellation of registration
The court considered the argument of the petitioner that a personal hearing should have been granted before the cancellation of registration as per the first proviso to Section 29(2)(a) of the CGST Act. The counsel for the Revenue acknowledged the lack of clarity regarding the nature of the notices sent and agreed that a personal hearing should be granted before cancellation. The court emphasized the importance of a personal hearing before taking such drastic actions.

Issue 4: Compliance with deposit condition for personal hearing
The court set aside the impugned notice of cancellation solely for the purpose of providing a personal hearing to the petitioner. It directed the petitioner to deposit a specified amount to the CGST account within a stipulated time frame. Compliance with the deposit condition would lead to a scheduled personal hearing, ensuring due process. Failure to comply would result in the revival of the cancellation order. The court outlined a timeline for the process and emphasized the need for expeditious decision-making.

In conclusion, the judgment addressed the complex issues of ITC, registration cancellation, and the importance of providing a fair opportunity for a personal hearing before taking adverse actions. The detailed analysis and directives provided clarity on the legal aspects involved in the case.