2022 (5) TMI 861 - HC - GST

Cancellation of registration of applicant-company - opportunity of personal hearing not provided - violation of the basic principles of natural justice - powers conferred under Section 107 of the CGST Act, 2017 - HELD THAT - Having examined the show cause notices as well as the orders impugned in this batch of writ applications, we notice that the show cause notice issued by the respondent authority is bereft of any material particulars. Not only that, no sufficient opportunity has been provided by the respondent authority while adjudicating such show cause notice. We could not overlook the fact that all the show cause notices seeking cancellation of registration in this batch of writ applications are issued during the surge of Covid-19 pandemic i.e. in the month of March, 2021. The reply was placed on record by the writ applicant specifically requesting for personal hearing through video conferencing. In fact in the reply, the attention of the respondent authorities has been drawn to the fact that no reason or details have been furnished to respond to such show cause notice. Even the order impugned lacks the reasons. Even otherwise, the reason assigned by the respondent authority is without any basis being found in the show cause notice. Even in the show cause notice, seeking revocation of cancellation of registration, the authorities have choose to proceed on the ground other than the reason given in the original show cause notice seeking cancellation of registration. It appears from the reasons and findings recorded by the appellate authority that reliance is placed on the report dated 22.12.2021 submitted by the Joint Commissioner, CGST, Gandhinagar, having informed that the said tax payers did not hold any ground for revocation of cancellation of registration. In AGGARWAL DYEING AND PRINTING WORKS VERSUS STATE OF GUJARAT 2 OTHER (S) 2022 (4) TMI 864 - GUJARAT HIGH COURT , the show cause notices seeking cancellation of registration of dealers so issued lack material particulars and this Court further found that final orders of cancellation of registration so passed were bereft of any reasons. This Court allowed the aforesaid writ applications solely on the ground of violation of principles of natural justice and had further quashed and set aside the consequential final orders cancelling the registration with a liberty to the respondent authority to issue fresh Notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing and to pass speaking orders on merits. This Court had also directed the respondent authorities to cure the technical glitches and to issue a show cause notice in physical form containing all material particulars and information in order to enable the dealer to effectively respond to such show cause notice. The order passed by the Additional Commissioner (Appeals) is set aside - application allowed.

Summary

Issues Involved:
1. Legality and validity of the cancellation of GST registration.
2. Adequacy and specificity of the show cause notice.
3. Adherence to principles of natural justice.
4. Validity of the appellate authority's decision.

Detailed Analysis:

1. Legality and Validity of the Cancellation of GST Registration:
The writ applicants challenged the legality and validity of the orders passed by the respondents canceling their GST registration. The primary contention was that the cancellation orders lacked sufficient reasons and were based on vague allegations of fraud, willful misstatement, or suppression of facts. The court noted that the show cause notice and the subsequent orders were bereft of any material particulars and failed to provide a clear basis for the cancellation. This lack of specificity rendered the cancellation orders unsustainable in law.

2. Adequacy and Specificity of the Show Cause Notice:
The show cause notices issued to the writ applicants were found to be deficient as they did not contain specific reasons or details to support the allegations of fraud or misstatement. The court observed that the notices merely reproduced the language of Section 29(2)(e) of the CGST Act without providing any substantive evidence or particulars. This deficiency violated the principles of natural justice, as the writ applicants were not given a fair opportunity to respond to the allegations.

3. Adherence to Principles of Natural Justice:
The court emphasized that the principles of natural justice were not adhered to during the cancellation proceedings. The writ applicants were not provided with a proper opportunity for a personal hearing, especially during the COVID-19 pandemic when requests for virtual hearings were ignored. Additionally, the respondent authorities relied on undisclosed material and instructions from the Preventive Section, which were not shared with the writ applicants. This lack of transparency and opportunity to contest the evidence further violated the principles of natural justice.

4. Validity of the Appellate Authority's Decision:
The appellate authority's decision to uphold the cancellation of registration was also scrutinized. The court found that the appellate authority had mechanically recorded reasons and findings without addressing the specific grounds raised by the writ applicants. The appellate orders were similar across multiple cases, indicating a lack of individual consideration. The court noted that the appellate authority failed to consider the procedural lapses and the violation of natural justice principles in the original cancellation proceedings.

Conclusion and Directions:
The court quashed the impugned show cause notices, the consequential orders canceling registration, and the orders rejecting the revocation applications. The court granted liberty to the respondent authority to issue fresh show cause notices with all material particulars and evidence. The respondents were directed to provide the writ applicants with a fair opportunity to submit their replies and supporting documents, as well as to grant sufficient opportunity for personal hearings. The court emphasized the need for speaking orders that address all submissions and contentions raised by the writ applicants. The decision in the case of Aggarwal Dyeing and Printing Works was cited as a precedent for ensuring compliance with natural justice principles and procedural fairness.