Retrospective cancellation of GST registration without a hearing was set aside and remanded for readjudication.
Summary in Key Points:
- Issue: Whether the cancellation of the assessee’s GST registration with retrospective effect was valid when the assessee was not given an opportunity to be heard.
- Facts: The assessee’s registration was initially cancelled for failure to update bank account details. It was later restored, and the assessee applied for cancellation again when closing their business. This cancellation was granted with effect from 30-11-2021. However, an appeal was filed, and the cancellation date was changed to 1-7-2021 without proper notice to the assessee.
- Decision: The High Court held that the cancellation order with retrospective effect violated the principles of natural justice as the assessee was not given a fair hearing.
Analysis:
The High Court ruled in favor of the assessee, setting aside the order that retrospectively cancelled the GST registration. The court emphasized that the assessee’s registration had already been cancelled once, and the department had subsequently entertained their request for cancellation. The fact that the assessee was not heard before the impugned order was made constituted a violation of natural justice.
Important Note: This case reinforces the importance of adhering to the principles of natural justice, even in seemingly straightforward administrative matters like GST registration cancellation. The right to be heard is a fundamental principle that must be respected, and any action taken without affording the affected party a fair hearing can be challenged and overturned. This case serves as a reminder to the tax authorities to ensure procedural fairness and transparency in their dealings with taxpayers.
HIGH COURT OF BOMBAY
Vindu Trading
v.
Office of Deputy Commissioner State Tax*
M.S. Sonak and Jitendra Jain, JJ.
WRIT PETITION NO. 10304 OF 2023
NOVEMBER 11, 2024
Advait Tamhankar and Ms. Padmaja Malgaonkar for the Petitioner. Ms. S.D. Vyas, Addl.G.P and Ms. P.N. Diwan, AGP for the Respondent.
JUDGMENT
MS Sonak, J.- Heard learned counsel for the parties.
2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties.
3. The Petitioner challenges the order dated 24 March 2023 (Exhibit “F”) by which the Appellate Authority allowed the second Respondent’s Appeal against the order dated 11 October 2021, cancelling the Petitioner’s GST registration effective 31 July 2021.
4. The record shows that the third Respondent issued a Show Cause Notice to the Petitioner on 24 September 2021, requiring him to update his bank account details. On 11 October 2021, the third Respondent revoked the Petitioner’s GST registration because he had failed to respond.
5. The Petitioner updated the bank account details and applied to restore the registration. Accordingly, the order dated 11 October 2021 was revoked, and the Petitioner’s GST registration was restored by an order dated 11 November 2021.
6. The Petitioner pleaded that he intended to close his business and therefore applied for cancellation of registration on 8 December 2021, requesting such cancellation effective from 30 November 2021. Based on the Petitioner’s application dated 8 December 2021, the third Respondent cancelled the Petitioner’s GST registration effective 30 November 2021.
7. The Petitioner has recorded the screenshot from the department’s portal, which indicates that the Petitioner’s registration was cancelled on the petitioner’s application effective 30 November 2021.
8. The second Respondent instituted an Appeal against the order dated 11 October 2021, which cancelled the Petitioner’s registration. This Appeal was allowed vide the impugned order dated 24 March 2023.
9. The operative portion of the impugned order reads as follows:-
” ORDER IN APPEAL
U/s.107 of MGST Act, 2017
Appeal petition number AD270522030403K/2022-23 filed On date 25/05/2022 by Mr Anand Mudholkar, Asst Commissioner of State Tax, Bhayander is allowed. The date of cancellation of GST registration of M/s. VINDU TRADING, GSTN-27BSLPV4397M1ZK, should be changed with Ab-initio effect i.e. w.e.f 01/07/2021. The proper officer is directed to take appropriate actions as per provisions of law. “
10. Learned counsel for the Petitioner has contended that no notice of this Appeal was validly served upon the Petitioner. He pointed out that the Show Cause Notices referred to in the impugned order were admittedly issued in 2022 when the Petitioner’s registration had already been cancelled. He pointed out that even the department’s portal shows that the Petitioner’s registration has been cancelled at the request of the Petitioner, effective 30 November 2021. He, therefore, submitted that the impugned order violates principles of natural justice and fair play.
11. Ms S. D. Vyas, the learned Additional Government Pleader for the Respondents, submitted that the Show Cause Notices were served at the address indicated in the application for cancellation of registration. Accordingly, she submitted that this is not a case of any breach of the principles of natural justice or fair play.
12. We have considered the rival contentions, and in the peculiar facts of the present case, the Petitioner should be granted an opportunity to contest the Appeal. Admittedly, the Show Cause Notices referred to in the impugned order were issued on 26 August 2022 and 1 December 2022. By this date, the Petitioner’s registration had already been cancelled.
13. The Petitioner claims not to have received the ShowCause Notices, and the service issue is unclear. In any event, the Petitioner’s registration has already been cancelled, and this position was reflected even on the department’s portal and cannot be ignored. After the order dated 11 October 2021, the department entertained the Petitioner’s request for cancellation and cancelled his registration. There is no dispute that factually, the petitioner was not heard before the impugned order was made.
14. Therefore, upon a cumulative consideration of the above factors, we set aside the impugned order dated 24 March 2023 on the grounds of failure of natural justice. The matter is remanded to the Appellate Authority, i.e. the Deputy Commissioner of State Tax, for fresh consideration of the Appeal. The Appeal must now be disposed of following law and on its own merits as expeditiously as possible and in any event on or before 31 December 2024.
15. Learned counsel for the Petitioner, based on instructions from the Petitioner, now accepts notice in the Appeal. The parties are now directed to appear before the Appellate Authority, i.e. the Deputy Commissioner of State Tax, Bhayander, on 25 November 2024 at 11:00 a.m., without insisting upon any separate or formal notice.
16. The Appellate Authority must hear the Appellant and the Petitioner and dispose of the Appeal, which is now restored to his file on its own merits and following the law. All parties’ contentions on the merits of the Appeal are left open.
17. In addition, we record that future notices to the Petitioner would be served by email at the following email ID of the Petitioner: –
“karanjshah@gmail.com”
18. This information is now furnished by the learned counsel for the Petitioner, based upon express instructions from the Petitioner.
19. The Rule is made absolute in the above terms without any cost order.
20. All concerned to act on an authenticated copy of this order.