2023 (8) TMI 890 - HC - GST

Rejection of appeal of Petitioner under Section 107 of the Central Goods and Service Act - cancellation of GST registration of petitioner - violation of principles of natural justice - HELD THAT - There is much substance in the contention as urged on behalf of the Petitioner. Insofar as the breach of the principles of natural justice, it is noted from the show cause notice that no documents were furnished to the Petitioner in support of the sole ground which are given here. The Petitioner had sought for an adjournment that he was not available in the town, by his email dated 14th April 2022 and that the proceedings be kept for hearing on 16th May 2022. However, the Superintendent proceeded to cancel the registration by an order dated 4th May 2022 that too by erroneously recording that the Petitioner was heard and the documents and reply submitted by him was examined, when neither the Petitioner was heard nor any documents were filed by the Petitioner. It is found that inherent defect/illegality in the impugned order was brought to the attention of the Appellate Authority in the Petitioner s appeal filed by raising the specific ground - However, in the impugned order dated 23rd January 2023, the Appellate Authority has proceeded to overlook such ground and in fact has proceeded on a fresh material, namely, the range officer s report in regard to the short paid tax and other materials in regard to the cancellation of registration of the suppliers of the Petitioner s, as set out in the impugned order. Considering the settled principles of law as also the mandate of the provisions of Section 29(2) of the CGST Act, 2017, it is opined that the impugned orders passed by both the authorities are in breach of principles of natural justice - the impugned orders, therefore, cannot be sustained and would be required to be set aside. The impugned Order-In-Original cancelling the Petitioner s GST Registration is quashed and set aside and also the orders passed by the Appellate Authority dated 23rd January 2023 are quashed and set aside - petition allowed.

Summary

Issues involved:
Cancellation of GST registration under the Central Goods and Service Tax Act, 2017 without following principles of natural justice; Appeal under Section 107 of the CGST Act dismissed by the Appellate Authority, alleging breach of natural justice in the appellate proceedings.

Cancellation of GST Registration:
The Petitioner's registration under the Central Goods and Service Tax Act, 2017 was cancelled by the Superintendent without granting a hearing or furnishing relevant documents, leading to a violation of natural justice principles. The Petitioner responded to the show cause notice for cancellation by requesting time to reply and appear before the concerned officer, but the registration was cancelled without a hearing. The order of cancellation erroneously stated that the Petitioner was heard and submissions were examined, when in fact, no such process took place.

Appeal under Section 107 of the CGST Act:
The Petitioner, aggrieved by the cancellation order, approached the Appellate Authority under Section 107 of the CGST Act. Despite raising grounds of breach of natural justice in the appeal, the Appellate Authority dismissed the appeal without considering the Petitioner's contentions. The Appellate Authority relied on reports regarding tax shortfalls and other suppliers' cancellations, which were not provided to the Petitioner, indicating a lack of procedural fairness.

Judgment:
The High Court found that both the cancellation order and the Appellate Authority's decision were in breach of natural justice principles. The Court noted that the Superintendent failed to grant a personal hearing as required by law before cancelling the registration. The Appellate Authority overlooked the Petitioner's specific grounds and relied on undisclosed materials in its decision. As a result, the Court quashed the cancellation order and the Appellate Authority's decision, directing the restoration of the Petitioner's registration within three weeks. The Court emphasized that if the department intends to proceed with cancellation, it must follow proper procedures and grant the Petitioner a fair hearing.

Conclusion:
The High Court allowed the petition, setting aside the cancellation order and the Appellate Authority's decision, and ordering the restoration of the Petitioner's GST registration. The Court clarified that the department could issue a fresh show cause notice and take appropriate steps in accordance with the law if it intends to proceed with cancellation. All contentions of the parties were kept open, and no costs were awarded in the matter.