Bombay HC Dismisses Frivolous Petition on Fraudulent GST Registration; Natural Justice Not a Straitjacket
Issue
Whether a writ petition challenging the cancellation of GST registration can be entertained on grounds of “violation of natural justice” when the petitioner has made false statements on affidavit, admitted during site verification that he had no connection to the registered entity, and failed to demonstrate any actual prejudice caused by the cancellation.
Facts
The Entity: A GST registration was obtained in the name of M/s Digital Storm, with Lokhamsi Popat Darji listed as the proprietor.
The Investigation: The GST department conducted a physical verification of the registered premises.
The Admission: During the verification, the proprietor was present but gave a statement admitting that he only ran a small stationery shop and had no connection whatsoever with the business entity M/s Digital Storm. This suggested that the registration was obtained through identity theft or the use of a “dummy” proprietor.
Cancellation: Based on this finding of suppression and misrepresentation, the proper officer issued a Show Cause Notice (SCN) and subsequently cancelled the registration.
The Challenge: The petitioner filed a writ petition challenging the cancellation, alleging a breach of natural justice and seeking condonation of delay due to an “unstable mental condition.”
Conduct in Court: The petitioner filed an affidavit before the High Court making statements that contradicted his earlier admission to the tax officer, effectively making false statements on oath.
Decision
The Bombay High Court dismissed the petition and imposed costs.
Natural Justice is Not Rigid: The Court reiterated that the principles of natural justice are not a “straitjacket formula.” To invoke them, a petitioner must demonstrate that actual prejudice was caused by the alleged procedural lapse. In a case of admitted fraud (where the proprietor denied connection to the firm), no amount of hearing could change the outcome.
Frivolous Petition: The Court termed the petition “frivolous” and unsupported by credible evidence.
False Affidavit: The Court took serious note of the contradictory statements made on affidavit versus the statement recorded during verification, viewing this as an abuse of the process of law.
Mental Condition Plea Rejected: The request to condone delay based on “unstable mental condition” was rejected because the petitioner failed to produce any medical documentary evidence to substantiate the claim.
Fraud Vitiates All: Since the SCN specifically cited that registration was obtained by means of fraud, willful misstatement, and suppression of facts (Section 29(2)(e)), procedural technicalities could not be used to validate a registration that was void from the start.
Key Takeaways
Clean Hands Doctrine: A petitioner approaching the High Court under writ jurisdiction must come with “clean hands.” Making false statements or suppressing earlier admissions leads to dismissal with costs.
Prejudice Test: To succeed on a plea of “denial of natural justice,” one must show that the outcome could have been different had the hearing been granted. If facts (like the admission of no business connection) make the outcome inevitable, the plea fails.
Fraud Overrides Procedure: Procedural defenses (like lack of notice details) are weak when the substantive charge is fraud or identity theft in obtaining registration.
Evidence for Medical Pleas: Courts require strict proof (medical certificates/history) when “mental instability” is cited as a reason for delay or non-compliance.