2025 (2) TMI 470 - HC - GST

Violation of principles of SCN - incomplete SCN - impugned orders are challenged by the petitioner primarily on the ground that the impugned SCN issued by the respondent No. 3 only quotes Rule 21(b) of CGST Rules 2017 and does not provide any material particulars of the violations so as to enable the petitioner to respond - HELD THAT - The entire proceedings taken pursuant to the impugned show cause notice are not sustainable. Once the show cause notice has been issued to the dealer soliciting his response to the violations detected it is incumbent upon the authorities to indicate the details or material particulars of such violations. Mere mention of the provision of law which as per the Assessing Authority stands violated is not enough. Once the petitioner responded to the show cause notice and brought it to the notice of the Assessing Authority that he had not committed any violations and had made all invoices through bank transactions the least that was required to be done by the Assessing Authority was to consider and dispose of that explanation by giving reasons. It was up to the Assessing Authority to accept or reject the explanation however for not accepting the explanation it was incumbent upon the respondent No. 3 to give reasons though brief. In the instant case this too has not happened. The Assessing Authority has by a single line cancelled the registration by merely saying that it has examined the reply to the show cause notice without even showing further whether on examination the Authority has found the reply satisfactory or not. Such cryptic order cannot take away the registration of the petitioner. Conclusion - The Assessing Authority has by a single line cancelled the registration without even showing further whether on examination the Authority has found the reply satisfactory or not. Such cryptic order cannot take away the registration of the petitioner. Petition allowed.

The issues presented and considered in the judgment are as follows:1. Whether the impugned show cause notice lacked material particulars, rendering the subsequent orders unsustainable?2. Whether the Assessing Authority failed to consider the petitioner's response and provide reasons for its decision?3. Whether the Appellate Authority erred in dismissing the petitioner's appeal without proper consideration?Issue-Wise Detailed Analysis:Issue 1:The petitioner challenged the impugned show cause notice dated 7th June, 2023, on the grounds that it lacked material particulars of the alleged violations, making it difficult for the petitioner to respond adequately. The Court noted that the notice only quoted Rule 21(b) of CGST Rules, 2017, without specifying the violations. The petitioner submitted a reply indicating compliance with payments through a bank account. The respondents argued that the petitioner was aware of the violations as they were reflected in a demand notice served online. However, the Court held that the lack of specific details in the show cause notice rendered the subsequent proceedings unsustainable.Issue 2:The Court emphasized that once a show cause notice is issued, authorities must provide details or material particulars of the alleged violations. In this case, the Assessing Authority failed to consider the petitioner's response and provide reasons for its decision to cancel the registration. The Court highlighted that the Authority should have at least considered and disposed of the petitioner's explanation with brief reasons, whether accepting or rejecting it. The cryptic order of cancellation without proper reasoning was deemed insufficient and unsustainable.Issue 3:The Appellate Authority's dismissal of the petitioner's appeal without proper consideration of the deficiencies in the show cause notice and the Assessing Authority's decision was found erroneous. The Court held that the Appellate Authority should have remanded the case back to the Assessing Authority to rectify the procedural flaws and ensure compliance with the law. By setting aside the Appellate Authority's order and quashing the cancellation of registration and show cause notice, the Court emphasized the importance of due process and reasoned decision-making in administrative proceedings.Significant Holdings:The Court held that the impugned orders were unsustainable due to the lack of material particulars in the show cause notice, failure to consider the petitioner's response, and absence of reasoned decisions. The core principle established is the requirement for authorities to provide detailed information in show cause notices, consider responses with reasons, and ensure procedural fairness in administrative actions. The final determination was to set aside the Appellate Authority's order, quash the cancellation of registration and show cause notice, allowing the Assessing Authority to issue a fresh notice and proceed lawfully.In conclusion, the judgment highlights the importance of procedural fairness, detailed communication of violations, reasoned decision-making, and adherence to legal requirements in administrative actions. The Court's decision emphasizes the need for authorities to provide clear and specific information in show cause notices, consider responses with reasons, and ensure a fair and transparent process in regulatory proceedings.

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