2023 (7) TMI 911 - HC - GST

Cancellation of registration of petitioner - registration obtained by means of fraud, wilful misstatement or suppression of facts - vague and ambiguous SCN - no discussion as to why and on what material the said officer had reached to the conclusion and/or the basis forming such opinion - validity of report submitted by the State GST Authority - violation of principles of natural justice - HELD THAT - It is clearly seen that there is no discussion in the above order as to why and on what material the said officer had reached to the conclusion and/or the basis forming such opinion. There is no material on record to show that any document in regard to the investigation carried out by the office of the Assistant Commissioner was provided to the petitioner, which is one of the grounds for cancellation of the registration, that the petitioner had utilized more Input Tax Credit (ITC) in GSTR 3B than what was available in GSTR 2A. In fact there was not the slightest of reference of any such allegations in the show cause notice. The second ground on which the registration is cancelled was referring to report submitted by the State GST Authority, and which had certain discrepancies as set out in paragraphs 2(a) (b) (c) of the order as noted above. The petitioner was never confronted / supplied any material in this regard. Also for the first time in such order passed by Assistant Commissioner, such reasons have been set out and are being made known to the petitioner. This itself is sufficient to reach a conclusion that the impugned order dated 31 January 2022 passed by the Assistant Commissioner, was in gross breach of principles of natural justice and deserved to be set aside. Conduct of the GST officer / Appellate authority - HELD THAT - It appears from the record that the fate of the petitioner insofar as the approach of the appellate authority is concerned, was not different. The unfairness in fact stood compounded even in the adjudication of the appeal before such high Officer. This is clear from the reading of the impugned order passed by the Joint Commissioner (Appeals-II). The Joint Commissioner (Appeals-II) while confirming the order passed by the Assistant Commissioner, cancelling the petitioner s registration, has purported to set out reasons - the impugned order does not address the issue of breach of the principles of natural justice suffered by the petitioner before the Assistant Commissioner - the appellate authority however appears to have compounded the inherent illegality by relying on materials which was never supplied to the appellant and which was also not to the knowledge of the petitioner. In fact on the edifice of a patently illegal show cause notice, the consequence of which appeared to be predetermined, the first authority proceeded to pass an order against the petitioner cancelling its registration. If the elementary principles of law of adherence to the principles of natural justice, in regard to issuance and adjudication of show cause notices are not being followed by such authorities, the fate of the citizens at the hands of the authorities, is just to be imagined. This is one case which is an eye opener. At all material times, such authorities would be required to act in strict adherence to the rule of law in passing orders in discharge of their official duties under the Act and the Rules. Such officers can in no manner have an approach to violate any legal rights of the citizens. We are constrained to make these observations so that other assessees who are similarly situated are not affected at the hands of such officers. The pain and suffering of any person who becomes a victim of such approach needs to be felt and realized by them in resorting to such actions. The authorities cannot drag the assessees into unwarranted litigation. The observations of the Court and the anguish needs to reach these officers. Application disposed off.

Summary

Issues Involved:

1. Legality of the Show Cause Notice.
2. Validity of the Cancellation Order by the Superintendent.
3. Examination of the Assistant Commissioner's Order.
4. Appellate Authority's Confirmation of Cancellation.
5. Breach of Principles of Natural Justice.
6. Judicial Conscience and Fairness of Officers' Actions.

Summary:

1. Legality of the Show Cause Notice:
The petitioner was issued a show cause notice dated January 5, 2021, for cancellation of its registration under Section 29(2) of the CGST Act, 2017. The notice was deemed "bereft of particulars" and "vague and ambiguous," bypassing norms of fairness and reasonableness. It suspended the petitioner's registration effective from the date of issuance without detailing any allegations of fraud, willful misstatement, or suppression of facts.

2. Validity of the Cancellation Order by the Superintendent:
Following the defective show cause notice, the Superintendent cancelled the petitioner's registration on January 20, 2021, with retrospective effect from July 1, 2017. The order cited "Non Genuine Entities under CBIC Jurisdiction" and instructions from an unspecified authority, without providing any material evidence or informing the petitioner about the instructions.

3. Examination of the Assistant Commissioner's Order:
The Assistant Commissioner, following the High Court's directive for a personal hearing, cancelled the registration again on January 31, 2022. The reasons included discrepancies found by the State GST Authority and utilization of more ITC in GSTR 3B than available in GSTR 2A. However, these grounds were never mentioned in the initial show cause notice, and no material was provided to the petitioner, constituting a gross breach of natural justice.

4. Appellate Authority's Confirmation of Cancellation:
The Joint Commissioner (Appeals-II) confirmed the cancellation without addressing the breach of natural justice. The appellate authority relied on materials not supplied to the petitioner and ignored documents submitted by the petitioner as per the Court's order. The decision was found to be casual and legally untenable.

5. Breach of Principles of Natural Justice:
The Court observed that the orders passed by the Superintendent, Assistant Commissioner, and Joint Commissioner (Appeals-II) were in gross violation of principles of natural justice. The authorities acted arbitrarily without following due process, leading to civil consequences for the petitioner.

6. Judicial Conscience and Fairness of Officers' Actions:
The Court expressed its disapproval of the unfair approach of the officers involved. It emphasized that such actions surpass all canons of fairness and reasonableness, affecting the rights of the petitioner under Articles 19(1)(g) and 300A of the Constitution. The Court highlighted the need for authorities to act in strict adherence to the rule of law and avoid dragging assessees into unwarranted litigation.

Conclusion:
The impugned orders by the Assistant Commissioner and Joint Commissioner (Appeals-II) were set aside. The petitioner's registration was ordered to be restored, with liberty to the respondents to follow due legal procedure if any fresh action is intended. The Court directed that a copy of the order be forwarded to the concerned officers and the Secretary, Ministry of Finance, Government of India, to ensure responsible and lawful actions in future.

Disposition:
Disposed of with no costs.