2023 (4) TMI 304 - HC - GST

Cancellation of GST registration of petitioner - HELD THAT - If the petitioner was in custody from 16.11.2022 until 08.12.2022 when he was admitted to bail and released, the petitioner could not have been served with Show Cause Notice dated 17.11.2022 and he could not have issued any response, but the GST registration is cancelled based on the said Show Cause Notice holding that petitioner s response is considered. It would be irrefutable that the cancellation of GST registration is without due opportunity and is arbitrary, and as such, this Court must interfere with the impugned order - However, neither can substantiate this argument based on a reference to the reasons assigned in the impugned order. The petition is allowed - The second respondent the Superintendent of Central Tax is permitted to pass suitable orders for revocation of the cancellation of the registration, if the petitioner files Returns for the relevant period for which returns have to be filed.

Summary

Issues involved:
Cancellation of GST registration without due opportunity and arbitrariness.

Summary:
The petitioner challenged the first respondent's order cancelling their GST registration, seeking direction for revocation and other reliefs. The petitioner was arrested after certain documents were seized from their business premises. While in custody, the first respondent issued a Show Cause Notice alleging violations of tax laws. The petitioner argued that the cancellation was arbitrary as they were in custody when the notice was issued. The respondents contended that the cancellation was a result of ongoing penal proceedings. However, the reasons for cancellation were deemed arbitrary by the court. The court allowed the petition, permitting revocation of the cancellation upon filing pending returns within a specified timeframe. The petitioner was given four weeks to file the returns, after which suitable orders would be passed within two weeks.

This judgment addressed the issue of cancellation of GST registration without affording due opportunity and arbitrariness in the decision-making process. The petitioner's arrest and subsequent issuance of a Show Cause Notice while in custody raised concerns about procedural fairness. The court found the cancellation based on the notice to be arbitrary and lacking proper justification. The respondents' argument that penal proceedings justified the cancellation was dismissed due to insufficient evidence provided in the impugned order. The court emphasized the importance of procedural fairness and the need for valid reasons to support administrative decisions, especially those with significant consequences like cancellation of GST registration.

The court's decision highlighted the fundamental principle of natural justice, emphasizing the right to be heard and respond before adverse actions are taken. The petitioner's inability to respond to the Show Cause Notice due to being in custody underscored the unfairness of the cancellation process. The court's intervention was based on the principle of arbitrariness, emphasizing the need for administrative actions to be supported by clear and justifiable reasons. By allowing the petition and setting conditions for revocation linked to filing pending returns, the court balanced the interests of both parties while upholding the principles of procedural fairness and natural justice.