2025 (2) TMI 509 - HC - GST

Cancellation of GST registration - no reasons given in the SCN from which it can be deciphered as to what is the reason why the registration is sought to be cancelled - Violation of principles of natural justice - HELD THAT - The impugned SCN itself is completely cryptic and raises two grounds for cancellation. Firstly that the firm is not conducting any business from the declared place of business. This is contrary to the physical verification report dated 22nd August 2023 (Annexure A.6) provided by the GST inspector in terms of the Rule 25 of the CGST Rules 2017. The said report clearly records that at the time of the physical verification the Petitioner himself was present and he was dealing in scrap material and the firm was also found functioning. The Petitioner has neither been given the proper material nor has a hearing been given. The cancellation of GST registration can have adverse consequences on the Petitioner who would find it challenging to conduct his business. The show cause notice is completely cryptic. The cancellation order dated 7th December 2023 is accordingly quashed and set aside - Petition disposed off.

Summary

The High Court considered a petition seeking the quashing of a Show Cause Notice (SCN) and subsequent cancellation of GST registration. The petitioner had received two SCNs, with the second issued on 24th November, 2023, citing grounds including non-conduct of business from the declared place and passing of inadmissible Input Tax Credit (ITC). The petitioner's registration was canceled on 7th December, 2023, leading to the present petition.The petitioner argued that the SCN lacked specific reasons for cancellation and that a crucial letter relied upon by the department was not served. The petitioner's reply was allegedly not considered, and no date for a personal hearing was provided, violating principles of natural justice. The respondent contended that since the petitioner did not file a reply, a hearing might not have been scheduled.The Court analyzed the SCN and found the grounds insufficient. The first ground regarding non-conduct of business was contradicted by a physical verification report showing the firm was operational. The second ground on inadmissible ITC lacked supporting documentation provided to the petitioner. The Court noted the lack of proper material and hearing, recognizing the adverse impact of registration cancellation on the petitioner's business.The Court directed the department to furnish the mentioned letter to the petitioner, allow a detailed reply, provide a personal hearing, and pass an order in accordance with the law. Consequently, the cancellation order was quashed, leaving all rights and remedies open for the petitioner. The writ petition was disposed of accordingly, along with any pending applications.