2022 (12) TMI 852 - HC - GST

Cancellation of GST registration of petitioner - restraint to carry out investigations since the investigation by Directorate General of GST Intelligence (DGGI) is already pending - HELD THAT - There is no provision under the GST Act which permits respondents to initiate proceedings for cancellation of registration second time and therefore, the order dated 03.08.2022 is ex-facie illegal and without jurisdiction - The show-cause notice dated 17.05.2022 proposing to cancel the registration is bereft of any reasons, and therefore, it is in clear violations of principles of natural justice. There are no specific reason for which proceedings for cancellation of registration has been initiated for the second time. Language of the show-cause notice dated 17.05.2022, does not communicate the reasons and the reasons are so general, therefore vague in nature. We are also mindful of the fact that the petitioner earlier also in response to the notice, dated 28.09.2021, had replied intimating the respondent authorities that pending DGGI investigation, all the documents are lying with the Office of DGGI and for the second time in response to the notice dated 17.05.2022, he had shown his inability to produce the documents for the very same reason. Further, in the affidavit too, no explanation was provided that under which provision respondent had initiated proceedings proposing cancellation of registration. This Court in case of Aggarwal Dyeing 2022 (4) TMI 864 - GUJARAT HIGH COURT and thereafter, in series of decisions has reiterated that the reasons are heart and soul of the order and non-communication of the same itself amounts to denial of reasonable opportunity of hearing resulting into miscarriage of justice. Applying the same principle, in our opinion, the show-cause notice dated 17.05.2022 being without any reason, the same is bad in law and deserves to be quashed and set aside and hereby quashed and set aside accordingly. The order dated 03.08.2022, of cancellation of registration is also quashed and set- aside. The respondents are directed to restore the registration of the petitioner forthwith. Application disposed off.

Summary

Issues:
1. Cancellation of GST registration and restoration of the same.
2. Legality of the show-cause notice for cancellation of registration.
3. Compliance with principles of natural justice in cancellation proceedings.
4. Validity of the order dated 03.08.2022 for cancellation of registration.
5. Jurisdiction under GST Act for initiating cancellation proceedings.
6. Consideration of reasons for cancellation in the show-cause notice.

Analysis:

Cancellation of GST Registration and Restoration:
The petitioner, engaged in manufacturing copper wire, had its GST registration canceled on 03.08.2022, with an effective date of 17.05.2022. The petitioner sought restoration of registration, arguing that the cancellation was unjustified. The High Court directed the restoration of registration, quashing the order of cancellation.

Legality of Show-Cause Notice:
The show-cause notice dated 17.05.2022, initiating the second cancellation proceedings, lacked specific reasons and was deemed vague by the Court. Citing the importance of reasons in such notices, the Court quashed the notice and subsequent cancellation order dated 03.08.2022.

Compliance with Principles of Natural Justice:
The petitioner had responded to previous notices, citing the unavailability of documents due to an ongoing investigation by DGGI. Despite this, the cancellation was carried out without due consideration. The Court emphasized the need for a reasonable opportunity to be provided before cancellation.

Validity of Cancellation Order:
The order dated 03.08.2022, canceling the registration, was found to be without proper justification and not in compliance with legal requirements. The Court set aside this order, directing the restoration of registration.

Jurisdiction under GST Act:
The petitioner argued that there was no provision allowing for a second cancellation of registration under the GST Act. The Court agreed, highlighting the lack of legal basis for the repeated cancellation proceedings.

Consideration of Reasons in Show-Cause Notice:
The Court noted that the reasons provided in the show-cause notice dated 17.05.2022 were general and lacked specificity. Emphasizing the importance of clear reasons for such actions, the Court quashed the notice and the subsequent cancellation order.

In conclusion, the High Court ruled in favor of the petitioner, quashing the cancellation order and directing the restoration of GST registration. The Court stressed the importance of providing clear reasons and ensuring compliance with legal principles in such proceedings, emphasizing the need for a fair opportunity to be given before taking drastic actions like cancellation of registration.