2023 (6) TMI 579 - HC - GST

Cancellation of GST registration of petitioner - non-supply of relevant reasons and material while proposing cancellation of registration - denial of reasonable opportunity of defending himself and replying to the show cause notice thereby breaching the rule of natural justice (audi alteram partem). HELD THAT - Affording of opportunity of being heard is a pre-condition for exercising the power of cancellation of registration. The expression opportunity of being heard has been explained time and again by various decisions of the Apex Court as well as this Court and other High Courts. Reverting to the facts herein, it is obvious at first glance that the show cause notice did not contain sufficient reasons to enable the assessee-petitioner to file a reply and, therefore, reasonable opportunity of being heard was denied to the petitioner. By saying that the registration has been obtained by fraud/wilful misstatement/suppression of facts, is not sufficient. Such terms need to be supported by reasons as to why, how and under what circumstances the registration was obtained by fraud/wilful misstatement/ suppression of facts. More so, such reasons ought to be supported by at least some fundamental supporting material, which, in the instant case is conspicuously missing. This Court has no manner of doubt that the impugned show cause notice dated 28.01.2022 (Annexure P/2) and the consequential order of cancellation of registration dated 11.02.2022 (Annexure P/4), rejection of application for revocation of cancellation of registration dated 30.03.2022 and the appellate order dated 13.06.2022 (Annexure P/9) are vitiated in law for being vague and having been issued in violation of principles of natural justice ( audi alteram partem ). The impugned order of cancellation of registration dated 11.02.2022 (Annexure P/4), the order of rejection of application for revocation of cancellation dated 30.03.2022 and appellate order dated 13.06.2022 (Annexure P/9) are quashed - petition allowed.

Issues Involved:
1. Vagueness of the show cause notice.
2. Denial of reasonable opportunity to the petitioner.
3. Violation of principles of natural justice.
4. Validity of subsequent orders based on the initial flawed notice.

Summary:

Vagueness of the Show Cause Notice:
The petitioner contended that the show cause notice dated 28.01.2022 was vague as it did not supply relevant reasons and material for the proposed cancellation of registration under the State Goods and Services Tax Act (SGST). The notice merely stated that the registration was obtained by "fraud, wilful misstatement or suppression of facts" without any supporting material.

Denial of Reasonable Opportunity:
The petitioner argued that they were denied a reasonable opportunity to defend themselves and reply to the show cause notice, thus breaching the rule of natural justice (audi alteram partem). The impugned order of cancellation of registration was passed without considering the petitioner's reply, which was filed within the prescribed period.

Violation of Principles of Natural Justice:
The court observed that the principle of natural justice was disregarded by the Revenue at the initial stage of issuing the show cause notice. The notice did not contain sufficient reasons to enable the petitioner to file a reply, and the subsequent orders were also bereft of any substantial reasons. The appellate authority's physical verification of the petitioner's premises could not validate the initial procedural deficiencies.

Validity of Subsequent Orders:
The court noted that the subsequent orders, including the rejection of the application for revocation of cancellation and the dismissal of the appeal, were vitiated due to the initial flawed notice. The appellate authority failed to address the violation of natural justice principles and relied on a physical verification conducted at the appellate stage.

Conclusion:
The court quashed the impugned orders of cancellation of registration, rejection of the application for revocation, and the appellate order. The Revenue was granted liberty to issue a fresh, proper, and lawful show cause notice to the petitioner if so advised.

Orders:
1. W.P. No.21659 of 2022: The impugned order of cancellation dated 11.02.2022, the order of rejection of application for revocation dated 30.03.2022, and the appellate order dated 13.06.2022 were quashed.
2. W.P. No.22416 of 2022: The impugned order of cancellation dated 25.03.2022 and the appellate order dated 13.06.2022 were quashed.
3. The Revenue is permitted to issue a fresh, proper, and lawful show cause notice to the petitioner-assessee.

Costs:
No order as to costs.

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