In a recent case, the Telangana High Court ruled that the Show Cause Notice ( SCN ) must contain the details on fraud, wilful misstatement or suppression of facts for cancelling the GST ( Goods and Services Tax ) registration as under Section 29(2)(e) of CGST Act, 2017.
Justice Sujoy Paul and Justice N. Tukaramji observed that “Needless to mention that the show cause notice dated 09.11.2023 became the foundation for issuance of orders dated 29.11.2023 and 23.02.2024, since the foundation cannot sustain judicial scrutiny, the entire edifice of orders passed thereupon are liable to be jettisoned.”
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T S R Exports, the GST registrant filed a writ petition before the court challenging order for cancellation of registration in Form GST REG-19 dated 29.11.2023 and order of rejection of application for revocation of cancellation in GSTR REG-05 dated 23.02.2024.
The petitioner contended that the SCN was merely a replication of the statutory language of Section 29(2)(e) of the GST Act and failed to provide any concrete details about the alleged infractions.
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This omission, according to the petitioner, prevented them from filing an effective response and rendered the SCN invalid. Consequently, the petitioner argued that both the cancellation order and the rejection of the revocation application were based on this flawed notice and, therefore, could not withstand judicial scrutiny.
The Court agreed with the petitioner’s argument that the SCN failed to adequately detail the factual basis for invoking Section 29(2)(e) of GST law. It was observed that the SCN lacked a clear explanation of the factual backdrop or reasons supporting the conclusion of fraud, misstatement, or suppression of facts.
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It noted that an SCN must provide a specific factual context for the alleged breach to justify the invocation of Section 29(2)(e) of the GST legislation. Without such detailed information, the petitioner could not effectively respond, rendering the notice deficient and invalid.
The High court referred the cases of Canara Bank vs. Debasis Das and Rajesh Kumar vs. CIT of the Supreme court. In the Canara Bank case, the apex court observed that ‘Notice is the first limb of this principle. It must be precise and unambiguous. It should apprise the party determinatively of the case he has to meet.’
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Further, in the other case i.e., Rajesh Kumar vs. CIT, the supreme court mentioned that “The notice issued may only contain briefly the issues which the assessing officer thinks to be necessary. The reasons assigned therefor need not be detailed ones.”
The SCN dated November 9, 2023, was foundational to the subsequent orders of cancellation and revocation rejection, stated the High Court. As the SCN did not meet the required standards for detailing the factual breaches, the Court invalidated it and the subsequent orders.
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Consequently, the bench set aside the SCN, the cancellation order, and the rejection of the revocation application. However, the Court clarified that the restoration of the petitioner’s GST registration does not entitle them to utilise any unutilized Input Tax Credit (ITC) until the completion of the revised SCN proceedings.
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