In a recent ruling, The Delhi High Court has set aside the cancellation of a GST registration, citing that the Show Cause Notice ( SCN ) failed to provide necessary details, as it merely quoted the statutory provision without providing specific reasons for the proposed cancellation, such as alleged fraud, misstatement, or suppression, and failed to indicate the possibility of retroactive cancellation of the petitioner’s Goods and Service Tax ( GST ) registration.
The petitioner, Ravi challenged an order dated February 14, 2024, which retroactively cancelled their Goods and Services Tax (GST) registration, effective from December 16, 2022.
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The petitioner had previously received a Show Cause Notice (SCN) on April 5, 2023, which required them to explain why their GST registration should not be cancelled. The notice alleged that the petitioner was either non-operational or non-existent at their principal place of business. In response, the petitioner explained on April 11, 2023, that their shop had been temporarily closed due to family events and requested a fresh physical verification of the premises. The petitioner also sought the revocation of the cancellation order.
Following this, the concerned officer conducted a visit on April 10, 2023, and uploaded photographs of the premises to the GST portal. Based on this verification, the cancellation proceedings were dropped on April 12, 2023, and the suspension of the petitioner’s GST registration was lifted. However, several months later, new proceedings were initiated to cancel the petitioner’s GST registration, as reflected in a fresh SCN dated July 31, 2023.
This new order was issued in response to the latest SCN, which again required the petitioner to justify why their GST registration should not be cancelled. The SCN cited Section 29(2)(e) of the GST Act, alleging that the registration had been obtained through fraud, wilful misstatement, or suppression of facts. The petitioner was instructed to respond within seven working days and to appear for a personal hearing. Despite this directive, the SCN did not specify a date or time for the hearing.
The SCN was criticized for its lack of detail, as it failed to provide specific reasons for the proposed cancellation, merely quoting the statutory provision without elaborating on the alleged fraud, misstatement, or suppression. Additionally, the SCN did not indicate that the petitioner’s GST registration might be cancelled retroactively.
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The division bench, comprising Justice Vibhu Bhakru and Justice Sachin Datta, noted that the SCN fell short of the required standards, as it did not give the petitioner a fair opportunity to address the allegations, a fundamental principle of natural justice. Consequently, the bench deemed the order unreasonable and in violation of natural justice principles.
In conclusion, the court allowed the petition, setting aside the impugned order. The respondents were instructed to restore the petitioner’s GST registration immediately. However, the court clarified that this decision does not prevent the respondents from initiating new proceedings for any statutory violations or the recovery of dues, provided such actions are taken in accordance with the law.
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