2023 (6) TMI 888 - HC - GST

Cancellation of GST registration of petitioner - allegation of vague SCN for not supplying the relevant reasons and material while proposing cancellation of registration - denial of reasonable opportunity of defending himself and replying to the show cause notice - violation of principles of natural justice (audi alteram partem). HELD THAT - It is evident as day-light that the principle of natural justice (audi alteram partem) has been given a go-bye by the Revenue at the very initial stage of issuance of show cause notice - affording of opportunity of being heard is a precondition for exercising the power of cancellation of registration. In the present case, 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 - More so, the order of cancellation of registration is also bereft of any reason whatsoever and thus disables the petitioner-assessee from effectively availing the remedy of statutory appeal u/S.107. This Court profitably refers to the Division Bench decision of Delhi High Court in the case of Balaji Enterprises 2022 (9) TMI 1107 - DELHI HIGH COURT where the facts and circumstances especially the text of the show cause notice impugned therein were almost similar to the text of the impugned show cause notice herein - it was held in the said case that a plain reading of the order would show, that the petitioner s registration was cancelled on account of an enquiry pending against the petitioner, which evidently is being carried out by DGGI, Chennai concerning supply of spurious goods. In the conspectus of aforesaid discussion, 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). Petition allowed.

Summary

Issues Involved:
1. Vagueness of the show cause notice.
2. Denial of reasonable opportunity and breach of natural justice.
3. Legality of the cancellation of registration and subsequent orders.

Summary:

Issue 1: Vagueness of the Show Cause Notice
The petitioner-assessee challenged the cancellation of registration under the State Goods and Services Tax Act (SGST) on the grounds that the show cause notice dated 28.01.2022 was vague, lacking relevant reasons and material. The notice merely stated, "In case, Registration has been obtained by means of fraud, wilful misstatement or suppression of facts," without further details or supporting material. The court found that such a vague reason did not enable the petitioner to file an adequate reply, thus violating the principle of natural justice.

Issue 2: Denial of Reasonable Opportunity and Breach of Natural Justice
The petitioner argued that they were denied a reasonable opportunity to defend themselves against the show cause notice, breaching the rule of natural justice (audi alteram partem). The court noted that the principle of natural justice requires the proper officer to provide sufficient reasons and supporting material when proposing the cancellation of registration. The court observed that the impugned show cause notice and subsequent orders lacked such reasons and material, thus denying the petitioner a fair opportunity to respond.

Issue 3: Legality of the Cancellation of Registration and Subsequent Orders
The court scrutinized the entire process leading to the cancellation of registration and found multiple procedural lapses. The impugned order of cancellation dated 11.02.2022, the rejection of the application for revocation of cancellation dated 30.03.2022, and the appellate order dated 13.06.2022 were all found to be vitiated in law due to vagueness and violation of natural justice principles. The court also referred to similar cases, such as the Delhi High Court's decision in Balaji Enterprises, to underscore the necessity of adhering to procedural fairness.

Conclusion:
The court quashed the impugned orders in both W.P. No.21659 of 2022 and W.P. No.22416 of 2022. The Revenue was granted the liberty to issue a fresh, proper, and lawful show cause notice if they so advised. No order as to costs was made.