2024 (7) TMI 1244 - HC - GST

Cancellation of GST registration of petitioner - no reason for cancelling the petitioner s GST registration - violation of principles of natural justice - HELD THAT - The submission that the impugned SCN and the impugned cancellation order are liable to be set aside. The impugned SCN does not contain any specific allegation other than alleging that there was non-compliance of any specified provision in the GST Act or the Rules made thereunder . The impugned SCN does not mention any specific provision, which is alleged to have been violated. It is impossible to ascertain as to which provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Delhi Goods and Services Tax Act, 2017 (DGST Act) are allegedly not complied with by the petitioner This Court has in several decisions held that such cryptic show cause notices fail to meet the requisite standards of a show cause notice. A show cause notice must clearly specify the allegations on the basis of which an adverse action is proposed. The entire object of a show cause notice is to enable the noticee to respond to such allegations and set out why the proposed adverse action should not be taken. The impugned SCN fails to clearly specify the allegations capable of eliciting any meaningful response. Such mechanical exercise of issuing the show cause notice serves little purpose. The impugned cancellation order is also unreasoned and fails to disclose the grounds on which the Proper Officer has cancelled the petitioner s GST registration. Therefore, apart from falling foul of the principle of natural justice, the impugned order is also liable to set aside as not being informed about any reason - the impugned SCN and impugned cancellation order are set aside. Petition allowed.

Summary

Issues:
1. Cancellation of Goods and Services Tax Identification Number (GSTIN) by respondent.
2. Validity of the show cause notice (SCN) issued for cancellation.
3. Compliance with natural justice principles in issuing SCN and cancellation order.
4. Grounds for cancellation of GST registration not disclosed in the order.

Analysis:
1. The petitioner sought directions to restore its GSTIN which was cancelled by the respondent through an order. The respondent proposed cancellation based on non-compliance with GST Act provisions. The petitioner's GST registration was suspended, and the respondent later issued a cancellation order with no specific reason mentioned for the cancellation.

2. The impugned SCN lacked specificity as it did not mention the particular provisions allegedly violated by the petitioner. The High Court held that such cryptic show cause notices fail to meet the requisite standards, as they should clearly specify the allegations to enable a meaningful response. The purpose of a show cause notice is to inform the noticee of the allegations and allow them to respond adequately.

3. The Court emphasized that the SCN must comply with the principles of natural justice, which include clearly specifying the allegations to enable a proper response. The impugned SCN, by not mentioning the specific provisions allegedly violated, prevented the petitioner from effectively responding. Orders passed in violation of natural justice are considered void, leading the Court to set aside both the SCN and the subsequent cancellation order.

4. Additionally, the Court found the cancellation order to be unreasoned and lacking disclosure of grounds for cancelling the GST registration. Apart from violating natural justice principles, the order's lack of reasoning rendered it liable to be set aside. The Court highlighted the importance of informing the affected party of the reasons behind adverse actions to ensure procedural fairness.

In conclusion, the High Court set aside both the show cause notice and the cancellation order, clarifying that the respondent could issue a fresh notice if compliance with statutory provisions was still in question. The judgment underscored the significance of adhering to natural justice principles and providing clear, reasoned communication in administrative actions to uphold procedural fairness and protect the rights of the parties involved.