The Delhi High Court has set aside an unreasoned Goods and Service Tax ( GST ) registration cancellation order, which failed to disclose the grounds on which the Proper Officer canceled the assessee’s GST registration, thereby violating the principles of natural justice.
The assessee was registered with the GST authorities on 01.11.2023. The respondent proposed to cancel the GST registration and accordingly, issued the show cause notice dated 29.03.2024. The only reason specified in the impugned SCN for proposing to cancel the petitioner’s GST registration.
The assessee was called upon to furnish the response to the impugned SCN within seven working days from the date of its receipt. The petitioner appear before the Proper Officer on 05.04.2024 at 12:32 PM and was also put to notice that if it failed to respond within the stipulated date or failed to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.
The assessee responded to the SCN claiming that it was a genuine tax payer and was ready to comply with the statutory provisions. The assessee also uploaded a copy of the Aadhaar Card, PAN Card and Rent Agreement and requested the Proper Officer to examine all the documents. There was an obvious typographical error in the response of the petitioner in as much as it requested the Proper Officer to revoke its GST registration instead of the suspension.
Thereafter, the Proper Officer passed the impugned cancellation order, which mentions no reason for canceling the assessee’s GST registration. It merely states that it is in reference to the impugned SCN. It is also material to note that the assessee GST registration was canceled ab initio – with retrospective effect from 11.11.2023.
The court concur with the submission that the impugned SCN and the impugned cancellation order are liable to be set aside. The impugned SCN does not contain any specific allegation other than alleging that there was non-compliance of “any specified provision in the GST Act or the Rules made thereunder”. The impugned SCN does not mention any specific provision, which is alleged to have been violated.
Further held that such cryptic show cause notices fail to meet the requisite standards of a show cause notice. A show cause notice must clearly specify the allegations on the basis of which an adverse action is proposed. The entire object of a show cause notice is to enable the notice to respond to such allegations and set out why the proposed adverse action should not be taken. The impugned SCN fails to clearly specify the allegations capable of eliciting any meaningful response. Such mechanical exercise of issuing the show cause notice serves little purpose.
The division bench of Justice Vibhu Bhakru and Justice Sachin Datta held that it was material to bear in mind that the impugned show cause notice was issued in compliance with the principles of natural justice. A notice that fails to clearly specify the allegations effectively disables the recipient from responding to them. It is well-settled law that any order passed in violation of the principles of natural justice was void.
The impugned cancellation order was also unreasoned and fails to disclose the grounds on which the Proper Officer has canceled the assessee’s GST registration. Therefore, apart from falling foul of the principle of natural justice, the impugned order is also liable to set aside as not being informed about any reason.
The court clarified that this order does not prevent the respondent from issuing any new show cause notice in accordance with the law, should the Proper Officer propose to take action for canceling the assessee’s GST registration due to non-compliance with statutory provisions.
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