2024 (8) TMI 1194 - HC - GST

Rejection of petitioner s application for the cancellation of his GST registration - vague SCN - although the impugned SCN called the petitioner to appear for a personal hearing, but no date and time was communicated for the same - Violation of principles of natural justice - HELD THAT - As is apparent from the tenor of the impugned SCN, it is cryptic and does not contain any specific details of the allegations. It merely refers to the statutory provision Rule 21 (e) of the Central Goods and Services Tax Rules, 2017 without providing any clue as to any transaction alleged to have resulted in wrongful availment of the Input Tax Credit (ITC). The purpose of issuing a show cause notice is to enable the notice to respond to the allegation on the basis of which an adverse action is proposed. It is a fundamental principle of natural justice that a person must not be condemned unheard. He must have an opportunity to meet the allegations as set out against him. The impugned SCN fails to satisfy the requisite standard of such a notice. The impugned SCN does not propose for the cancellation of the petitioner s GST registration with retrospective effect. Thus, the petitioner had no opportunity to contest pursuant to the passing of any such order. Thus, on this ground alone, the impugned cancellation order is liable to be set aside. Additionally, the petitioner was not provided any opportunity to be heard as no date or time for the personal hearing was communicated to the petitioner. It is apparent that the impugned cancellation order has been passed in violation of the principles of natural justice. However, since the petitioner also seeks for the cancellation of his GST registration, it is considered apposite to direct that the impugned cancellation order shall be operative prospectively, that is, from 09.06.2023 being the date of the impugned SCN, and not retrospectively from 01.07.2017. Petition disposed off.

Summary

Issues:
1. Impugning the rejection of GST registration cancellation and the subsequent cancellation order.
2. Lack of specific details in the show cause notice (SCN) and violation of natural justice principles.
3. Retroactive cancellation of GST registration and lack of opportunity for the petitioner to contest.

Analysis:
The petitioner challenged the rejection of his application for the cancellation of his GST registration and the subsequent cancellation order in the Delhi High Court. The petitioner had applied for cancellation of his GST registration, claiming to have discontinued his business. However, the proper officer issued a show cause notice (SCN) citing reasons for cancellation, including the wrongful availment of Input Tax Credit (ITC) under Rule 21(e) of the Central Goods and Services Tax Rules, 2017. The petitioner was asked to provide various documents and undertake certain actions. The impugned SCN lacked specific details of the allegations, violating the principles of natural justice by not allowing the petitioner to respond adequately.

Furthermore, the cancellation order was passed retrospectively from the date of GST registration, despite the impugned SCN not proposing such retrospective cancellation. The court noted that the petitioner was not given a chance to contest the retrospective effect of the cancellation order, which was a violation of natural justice. The court found fault with the cryptic nature of the impugned SCN and the lack of a specific opportunity for a personal hearing with a communicated date and time.

In light of the procedural irregularities and violation of natural justice principles, the court held that the impugned cancellation order was passed improperly. However, considering the petitioner's own request for cancellation of GST registration, the court directed that the cancellation order would be effective prospectively from the date of the impugned SCN, not retrospectively from the initial GST registration date. The court clarified that this decision did not prevent authorities from initiating proceedings for statutory violations or retrospective cancellation of GST registration, provided it was done lawfully. The petition was disposed of accordingly, and pending applications were also resolved.