2023 (9) TMI 1176 - HC - GST

Cancellation of GST registration of petitioner - impugned order does not furnish any reason whatsoever to cancel the registration of the petitioner - suppression of facts or not - violation of principles of natural justice - HELD THAT - There appears to be much substance in the submissions as urged on behalf of the petitioner, that the show cause notice dated 27th July 2022 issued to the petitioner itself was defective, inasmuch as, there was no material whatsoever referred in the show cause notice as to why the petitioner was being labelled of having obtained registration by means of fraud, wilful misstatement or suppression of facts. If the designated officer was to proceed against the petitioner on such material, details in that regard ought to have been furnished to the petitioner so as to invite the petitioner s reply on such serious allegation of fraud being committed by the petitioner. The petitioner certainly was kept in total darkness on the allegations which were sought to be raised against him so as to meet a case being put up by the department and which was in fact was not informed to the petitioner and/or concealed from the petitioner. The impugned order dated 11th November 2022 cancelling the registration of the petitioner further compounds the illegality as the impugned order also does not furnish any reason whatsoever in cancelling the registration of the petitioner. The impugned order is required to be held to be illegal not only on the ground of the same being in breach of the principles of natural justice but also on the ground of total non-application of mind, as the same is bereft of any reasons whatsoever which the law would recognize to justify cancellation of the registration of the petitioner. The impugned order is being passed mechanically and without application of mind - In the present case, the manner in which the show cause notice is issued and the impugned order is passed, would only assist the petitioner as it appears that the respondents had materials which could have formed the basis of the show cause notice, but the same was not informed to the petitioner and / or no attempt was made to remove the defect in the show cause notice, for reasons best known to the designated officer. The show cause notice cannot be an empty formality. These are serious issues which are to be noticed at the highest level in the department. We direct the respondents at the appropriate level of the Customs to consider the issues as highlighted, and a report be placed on record of the present proceedings, setting out the precautions to identify such cases of faulty adjudication of show cause notices, and the actions which can be taken on such issues. This be done within a period of four weeks from today. Petition disposed off.

Summary

Issues Involved:
1. Validity of the show cause notice dated 27th July 2022.
2. Legality of the impugned order dated 11th November 2022 canceling the petitioner's GST registration.
3. Compliance with principles of natural justice.
4. Accountability of the designated officer issuing the defective notice.

Summary:

Issue 1: Validity of the Show Cause Notice
The petitioner challenged the show cause notice dated 27th July 2022 under Article 226 of the Constitution of India, arguing that it did not furnish any reason for the alleged fraud, willful misstatement, or suppression of facts. The court observed that the notice was defective as it lacked material details necessary for the petitioner to respond effectively. The notice failed to inform the petitioner of the allegations, thus violating principles of natural justice.

Issue 2: Legality of the Impugned Order
The impugned order dated 11th November 2022, which canceled the petitioner's registration, was also challenged. The court found that the order did not provide any reasons for the cancellation and was passed without giving the petitioner an opportunity for a hearing. This lack of reasoning and breach of natural justice rendered the order illegal and a nullity.

Issue 3: Compliance with Principles of Natural Justice
The court emphasized that the impugned order was passed in patent breach of the principles of natural justice and showed gross non-application of mind. The order was passed mechanically, without setting out reasons, and thus could not be justified by reasons furnished later in the reply affidavit.

Issue 4: Accountability of the Designated Officer
The court noted that the defective show cause notice and the mechanical passing of the impugned order were counter-productive to the interest of revenue. The court directed the respondents to take a serious view of such issues and consider fixing accountability on officers who issue defective notices and orders.

Directions:
1. The show cause notice dated 27th July 2022 and the consequential order dated 11th November 2022 are quashed and set aside.
2. The respondents are at liberty to initiate fresh proceedings with a proper show cause notice that sets out appropriate reasons, to be adjudicated in accordance with law after granting the petitioner an opportunity to respond and a personal hearing.
3. All contentions of the parties are expressly kept open.
4. The respondents may exercise any other powers available in law as warranted by the facts and circumstances.
5. Setting aside the impugned order will restore the petitioner's registration status, but the revenue is not precluded from issuing a fresh order to suspend the registration as permissible by law.
6. The petition is disposed of with no costs.