2024 (8) TMI 637 - HC - GST

Action of the proper officer to cancel his GST registration ab initio (from the date it was initially granted) - cancellation order is bereft of any reason and does not spell out the grounds - violation of principles of natural justice - HELD THAT - A plain reading of the SCN indicates that same is not intelligible. Although, the SCN alleges that the petitioner has obtained registration by means of fraud, wilful misstatement, or suppression of facts. It does not disclose as to the nature of fraud allegedly committed; statement which is alleged to be a wilful mistake; or the nature of the relevant facts, which are alleged to have been suppressed by the petitioner. Section 29 (2) of the CGST Act empowers the proper officer to cancel a taxpayer s registration, including with retrospective effect, on the grounds as set out in Section 29 (2) of the CGST Act. In the present case, the SCN refers to clause (e) of Section 29 (2) of the CGST Act which provides for cancellation of a taxpayer s GST registration if it is obtained by means of fraud, wilful misstatement or suppression of facts. The SCN merely reproduces the statutory provision. It is apparent that the SCN does not meet the requisite standards of a show cause notice inasmuch as it does not enable the noticee to meaningfully respond to the allegations on the basis of which an adverse action was proposed - The cancellation order is also bereft of any reason and does not spell out the grounds for which the petitioner s GST registration has been cancelled. It is considered apposite to accede to the prayer made by the learned counsel for the petitioner. It is directed that the cancellation order shall take effect from the date of the SCN, that is, with effect from 28.06.2023, and not with retrospective effect from 29.12.2022 - petition disposed off.

Summary

Issues:
Challenge to rejection of application for condonation of delay in revocation of GST registration cancellation order.

Analysis:
The petitioner filed a petition challenging the rejection of their application seeking condonation of delay in filing for revocation of the cancellation order of their Goods and Services Tax (GST) registration. The petitioner was registered with the GST Authorities and carried on business for over four months before filing 'NIL' GST returns due to no transactions. The cancellation of registration was proposed due to alleged fraud, wilful misstatement, or suppression of facts, as per the Show Cause Notice (SCN) issued. The petitioner did not respond to the SCN, resulting in the cancellation of their registration. The petitioner later sought revocation of the cancellation order, citing delay due to unforeseen circumstances, but the application was rejected.

The High Court noted that the SCN lacked clarity as it did not specify the nature of fraud, wilful mistake, or suppressed facts. The cancellation order also did not provide reasons for the cancellation. The Court referred to Section 29(2) of the Central Goods and Services Tax Act, empowering the officer to cancel registration for various reasons, including fraud. However, in this case, the SCN merely reproduced the statutory provision without detailed allegations, hindering the petitioner's ability to respond effectively.

Consequently, the Court directed that the cancellation order would take effect from the date of the SCN, not retrospectively, clarifying that this decision does not prevent the authorities from pursuing statutory violations or tax recovery proceedings in accordance with the law. The judgment disposed of the petition with these terms, allowing for potential retrospective cancellation proceedings to be initiated lawfully. The Court emphasized the importance of providing clear grounds for cancellation actions to enable affected parties to respond adequately and ensure procedural fairness in such matters.