Grounds for GST Cancellation not shared with Taxpayer or cited in SCN: Bombay HC quashes Order [Read Order]

In a recent decision, the Bombay High Court ruled that a GST cancellation order is invalid if it relies on documents that were not shared with the taxpayer or mentioned in the show cause notice.

The case was brought forth by Manek Steel LLP, which challenged the cancellation of its GST registration by the tax department. The petitioner’s counsel argued that the show cause notice issued on 15 January 2022 did not clearly mention the reasons for cancellation and failed to include any supporting material.

The final order dated 7 February 2022 referred to a letter from the DeputyCommissioner dated 13 January 2022, but this letter was never shared with the petitioner. The petitioner was unable to respond meaningfully to the notice.

The petitioner also challenged the appellate order dated 28 March 2024, arguing that the appellate authority did not address the procedural lapses and denied relief despite clear violations of natural justice.

The government’s counsel accepted that the cancellation order and the appellate decision could be set aside. They requested permission to issue a fresh show cause notice and asked the court to prevent the petitioner from using their accumulated input tax credit during the interim period.

The division bench of Justices M.S. Sonak and Jitendra Jain observed that the show cause notice was vague and failed to explain the basis of the cancellation. The court also observed that referring to a document that was not provided to the taxpayer or cited in the notice was a breach of the principles of natural justice.

The Bombay High Court quashed both the order of cancellation and the appellate order. It allowed the department to issue a fresh show cause notice within four weeks, ensuring that all relevant material is shared with the petitioner.

Manek Steel LLP voluntarily undertook not to use its accumulated input tax credit for a period of three months, and the court accepted this undertaking as binding. The writ petition was allowed.

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