2024 (9) TMI 235 - HC - GST

Proper SCN or not - cancellation of registration and action of suspending the registration - SCN does not contain necessary details on the strength of which such a conclusion has been drawn - violation of principles of natural justice - HELD THAT - Since the show-cause notice and suspension of registration is founded upon a cryptic notice dated 29.02.2024, both are set aside. On regular basis, this kind of notices are painfully noticed, whereby, without assigning adequate reasons, the business of taxpayer is suddenly suspended. In absence of basic reasons available in the show-cause notice, the party aggrieved by it cannot even prefer an effective representation. It is wondered how in such an insensitive and mechanical manner, the registrations are being suspended by issuing defective show-cause notices. Such orders certainly have an adverse impact on the livelihood of taxpayer and hits Article 21 of the Constitution. Learned counsel for the petitioner insisted for imposition of costs. Faced with this, Sri P.Sri Harsha, learned Assistant Government Pleader, submits that he will appraise the authorities about observation of this Court so that henceforth such mistakes do not occur - costs not imposed. The impugned show-cause notice dated 29.02.2024 and the order suspending the registration are set aside - Petition allowed.

Summary

Issues:
1. Justifiability of show cause notice for cancellation of registration and suspension of registration.

Analysis:
The judgment delivered by the High Court of Telangana involved a singular pivotal question regarding the validity of a show cause notice for cancellation of registration and the subsequent suspension of registration. The petitioner's counsel argued that the notice lacked necessary details and was a mere reproduction of statutory language, rendering it cryptic and impossible to respond to effectively. The counsel contended that the petitioner's right to livelihood under Article 21 of the Constitution was impacted by the abrupt suspension of business. The respondent's counsel acknowledged the lack of necessary details in the show cause notice, further weakening its validity.

The impugned notice cited Section 29(2)(e) of the Central Goods and Service Tax Act, 2017, regarding registration obtained through fraud, willful misrepresentation, or suppression of facts. However, the notice failed to provide any specifics regarding the alleged fraud or misrepresentation by the petitioner, making it cryptic and indicative of a lack of application of mind. The court referred to a recent case where it was emphasized that a show cause notice must outline the factual backdrop of the breach to enable a meaningful reply. The court also cited precedents emphasizing the importance of a precise and unambiguous notice to ensure compliance with principles of natural justice.

The court highlighted previous cases where proceedings were interfered with due to the absence of reasons mentioned while initiating actions against the petitioners. The court ultimately set aside the show cause notice and suspension of registration, criticizing the trend of issuing defective notices leading to sudden business suspensions without adequate reasons. The judgment underscored the adverse impact on the taxpayer's livelihood and invoked Article 21 of the Constitution. The court urged authorities to be more sensitive and diligent in issuing such notices to safeguard the rights of taxpayers. Despite the petitioner's request for costs, the court refrained from imposing any, relying on the assurance of the respondent's counsel to address the court's observations to prevent future mistakes.

In conclusion, the High Court allowed the writ petition, setting aside the impugned show cause notice and registration suspension while reserving liberty for the respondents to proceed lawfully. The judgment emphasized the importance of issuing clear and detailed notices to uphold principles of natural justice and protect the rights of individuals in legal proceedings.