SCN and GST Cancellation Order is invalid when it lacks Reason and Clarity: Delhi HC [Read Order]

The Delhi High Court in a recent case has held that a Show Cause Notice ( SCN ) and Goods and Service Tax ( GST ) cancellation order is invalid when it lacks reason and clarity. The court viewed that neither the show cause notice nor the order spells out the reasons for cancellation, thus the order does not qualify as an order of cancellation of registration.

Aditi Agencies, the petitioner impugned the order in appeal dated 28.04.2023, whereby the appeal filed by the petitioner has been dismissed solely on the grounds of limitation. The petitioner had filed the appeal impugning order dated 27.01.2021 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 20.12.2020, merely stating the reason “response not received”. Petitioner also challenged the Show Cause Notice dated 09.01.2021. 

A Show Cause Notice was issued to show cause as to why the registration be not cancelled for the following reasons:-“Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”

The petitioner was in the business of trading and wholesale of medicines etc. and possessed a GST registration. Further, the order passed on the Show Cause Notice does not give any reasons for cancellation of the registration. It, however, stated that the registration is liable to be cancelled for the following reason “Response not received”. However, the said order in itself is contradictory. The order stated that “a reference to your reply dated 19.01.2021 to the show cause notice dated 09.01.2021” and the reason stated for cancellation was “Response not received”.  The order further stated that the effective date of cancellation of registration is 20.12.2020 i.e., a retrospective date.

Neither the show cause notice nor the order spells out the reasons for cancellation, thus the order does not qualify as an order of cancellation of registration. On one hand, it was stated that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. 

The petitioner submits that the petitioner had fallen seriously ill during the period and thus could not carry on the business or file his returns.

A division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja noticed that the Show Cause Notice as well as the impugned order of cancellation, are themselves vitiated on account of lack of reason and clarity. The appeal has been dismissed solely on the grounds of limitation. Since the very foundation of the entire proceedings i.e., the Show Cause Notice and the order of cancellation are vitiated, the proceedings are invalid.

The Court set aside the impugned show cause notice, order of cancellation and the order in appeal. GST registration of the petitioner is restored, subject to the petitioner filing requisite returns up to date. 

To Read the full text of the Order CLICK HERE

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