Orders cancelling GST registration without a hearing and reasons are invalid.

Issue: Whether the Appellate Authority’s orders dismissing appeals against GST registration cancellations are valid when the original cancellation orders were passed without adhering to principles of natural justice and due process.

Facts:

The revenue challenged orders cancelling GST registrations, citing the lack of an opportunity for hearing and proper reasoning in the original cancellation orders.
The Appellate Authority dismissed the appeals on the grounds of limitation.
The revenue had issued cryptic notices and cancellation orders despite High Court guidelines requiring detailed show cause notices and speaking orders.

Decision:

The court held that the orders were passed without following principles of natural justice and proper procedure, as laid down in the M/s. Aggrawal Dyeing & Printing case.
The court quashed the impugned orders of the Appellate Authority and the original registration cancellation orders.
The matter was remanded to the Assessing Officer with specific directions:
- Provide detailed reasons for the proposed cancellation.
- Give the assessee an opportunity to reply to the show cause notice.
- Grant a personal hearing to the assessee.
The court also directed that the assessee’s registration remain suspended during this process and prescribed a timeline for the Assessing Officer to dispose of the matter.

Key Takeaways:

This case reiterates the importance of adhering to principles of natural justice and due process in GST registration cancellation proceedings.
Cryptic notices and orders that lack proper reasoning and deny the assessee an opportunity to be heard are invalid.
Tax authorities must follow High Court guidelines and established procedures, including providing detailed show cause notices and speaking orders.
The decision emphasizes the need for fairness and transparency in GST proceedings, ensuring that taxpayers are given a proper chance to defend their registration before it is cancelled.

HIGH COURT OF GUJARAT

Sanjay Trading Company

Union of India

BHARGAV D. KARIA, and Niral R. Mehta, JJ.

R/SPECIAL CIVIL APPLICATION NO. 18947 of 2023

SEPTEMBER 20, 2024

Parth Rachchh, Paresh M Dave, and Amal Paresh Dave, Advs. for the Petitioner. Ms Hetvi H Sancheti for the Respondent.

ORDER

Bhargav D. Karia, J. – Heard learned advocate Mr. Paresh Dave for the petitioners and learned advocate Ms. Hetvi Sancheti for the respondents.

2. By this petition, the petitioners have challenged the orders passed by the Appellate Authority, whereby the orders of cancellation of registration passed by the Assessing Officer have been upheld and the appeals were dismissed on the ground of limitation.

3. The petitioners challenged the orders of cancellation of registration on the ground of not providing an opportunity of hearing as well as such order was passed without assigning any reason for cancellation of the registration of the petitioners.

4. The Coordinate Bench of this Court in case of M/s. Aggrawal Dyeing & Printing v. State of Gujarat reported in(Gujarat) has issued the guidelines to the respondent-authorities as under:

“18. Our final conclusion are as under:

18. 1. Until the Department is able to develop and upload an appropriate software in the portal which would enable the Department to feed all the necessary information and material particulars in the show cause notice as well as in the final order of cancellation of registration that may be passed, the authority concerned shall issue an appropriate show cause notice containing all the necessary details and information in a physical form and forward the same to the dealer by RPAD. In the same manner, when it comes to passing the final order, the same shall also be passed in a physical form containing all the necessary information and particulars and shall be forwarded to the dealer by RPAD.

18. 2 Over a period of time, we have noticed in many matters that the impugned order cancelling the registration of a dealer travels beyond the scope of the show cause notice. Many times, the dealer is taken by surprise when he gets to read in the order that the authority has relied upon some inspection report or spot visit report etc. If the authority wants to rely upon any particular piece of evidence then it owes a duty to first bring it to the notice of the dealer so that if the dealer has anything to say in that regard, he may do so. Even if the authority wants to rely on any documentary evidence, the dealer should be first put to the notice of such documentary evidence and only thereafter, it may be looked into.

18. 3 The aforesaid may appear to be very trivial issues but, it assumes importance in reducing the unnecessary litigation. Our concern is that on account ofprocedural lapses, the High Court should not be flooded with writ applications. The procedural aspects should be looked into by the authority concerned very scrupulously and deligently. Why unnecessarily give any dealer a chance to make a complaint before this Court when it could have been easily avoided by the department.

19. In the result, all the writ applications deserve to be allowed solely on the ground of violation of principles of natural justice and, accordingly, the writ applications are allowed. We quash and set aside the respective show cause notices of all the writ applications, seeking cancellation of registration as well as the consequential respective impugned orders cancelling registration with liberty to the respondent No. 2 to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicants, and to pass appropriate speaking orders on merits. It is needless to mention that it shall be open for the writ applicants to respond to such notices by filing objections / reply with necessary documents, if relied upon. We clarify that we have not gone into merits of the case.”

5. The aforesaid judgement was rendered in the year 2022. However, in spite of the above direction issued by this Court, the respondent-authorities without following such directions are issuing cryptic notices and orders for cancellation of registration number of the petitioners.

6. In the present matter, orders of cancellation of registration are passed without giving any reason by the respondent authorities, and appeals filed by the petitioners under Section 107 of the GST Act are also dismissed.

7. As the Appellate Authority has dismissed the appeals of the petitioner, the respondent authorities will not be able to exercise the revisional power under Section 108 of the GST Act. Therefore, the impugned orders passed by the Appellate Authority as well as the orders of cancellation of registration are required to be quashed and set aside. Accordingly, the matter is remanded back to the Assessing Officer at the show cause notices stage. However, the registration of the petitioners shall remain suspended till the showcause notices are decided by the Assessing Officer as per the following directions:

(i)

The Assessing Officer shall provide detail reason for cancellation of registration of the petitioners, if not supplied earlier within a period of two weeks from the date of receipt of copy of this order.

(ii)

Even if the reasons are supplied earlier and if the petitioner requests for the same, the respondent-authorities shall again provide a copy of the reasons for cancellation of the registration upon such request.

(iii)

The petitioner shall file written reply upon receipt of the detail reasons for issuance of the show-cause notice for cancellation of registration within a period of two weeks from the date of receipt of the reasons.

(iv)

After receipt of the reply from the petitioners, the respondent authorities shall pass appropriate order in accordance with law after providing opportunity of personal hearing to the petitioners and after considering the reply of the petitioners within a period of four weeks from the date of personal hearing.

(v)

The aforesaid timeline shall be followed by both the sides. The petitioners shall also cooperate with the respondentauthorities in compliance of the aforesaid timeline for disposal of the show-cause notice by the respondent authorities.

8. In view of the above, this petition is partly allowed by quashing and setting aside the impugned order passed by the Appellate Authority as well as order of cancellation of registration and the matter is remanded to the Assessing Officer at show-cause notice stage, however, the registration number of the petitioners shall remain suspended till such show cause notice is disposed of as per the directions given above.

9. It is clarified that this Court has not gone into the merits of the matter. The respondent-authorities shall pass appropriate order in accordance with law after providing detail reasons and opportunity of hearing to the petitioners.

10. This petition is accordingly disposed of. Notice is discharged. No order as to cost.