GST Registration Cancellation Quashed for Defective SCN and Violation of Natural Justice; Remanded for Fresh Proceedings.

Issue:

Whether an order cancelling GST registration (and subsequent rejection of its revocation) is valid if the initial show cause notice (SCN) for cancellation lacks particulars, the assessee is denied a proper opportunity to be heard, and relied-upon documents (like an inspection report) are not furnished.

Facts:

A show cause notice (SCN) was issued for the cancellation of the appellant’s GST registration. The appellant contended that this SCN was “bereft of any particulars,” meaning it lacked specific reasons or allegations for the proposed cancellation. The appellant submitted a reply denying the general allegation and requested an opportunity to furnish additional submissions. However, the registration was cancelled without any reference to the appellant’s representation.

Subsequently, the appellant filed an application for revocation of the cancellation of registration. A show cause notice was issued for this revocation application, but it also did not clearly state the reasons for the revocation being considered. The Appellate Authority, in its decision, referred to an inspection report that was drawn one day prior to the issuance of the SCN, but a copy of this report was never furnished to the appellant.

Decision:

In favor of the assessee (Matter remanded): The court held that since the initial show cause notice did not contain any reasons, it was a “non-est” notice in the eye of law. This meant the appellant did not have an adequate opportunity to rebut the allegations against it because the allegations were not clearly set out in the SCN. This inherent defect went to the root of the matter and could not be cured or rectified at a subsequent stage or in the appellate stage.

Furthermore, regarding the revocation proceedings, the Appellate Authority clearly referred to an inspection report drawn prior to the SCN, but a copy of which was not furnished to the appellant. The court found that there had been serious violation of principles of natural justice, and the appellant was not afforded any opportunity to put forth its contentions. The initiation of proceedings by issuance of the flawed show cause notice was fundamentally flawed. Consequently, all subsequent proceedings had to fail on the ground of error of jurisdiction as well as on the ground of violation of the principles of natural justice. The matter was accordingly remanded back to the original authority to decide the matter afresh after following due process.

Key Takeaways:

Specificity of Show Cause Notice (SCN): A show cause notice must clearly articulate the specific reasons, allegations, and particulars for the proposed action (e.g., cancellation of registration). A vague or “bereft of particulars” SCN is considered “non-est” (non-existent) in law, as it deprives the taxpayer of a meaningful opportunity to respond.
Fundamental Requirement of Natural Justice: The principles of natural justice, particularly audi alteram partem (hear the other side), mandate that an assessee must be fully informed of the case against them and provided with all relied-upon documents (like inspection reports) before an adverse order is passed.
Furnishing of Relied-Upon Documents: The non-furnishing of crucial documents relied upon by the department (such as an inspection report in this case) is a severe violation of natural justice, even if the SCN vaguely refers to them.
Inherent Defect Cannot Be Cured: A fundamental defect in the initial SCN (lack of particulars) is an “inherent defect” that cannot be cured at later stages or in appeal. It renders the entire subsequent proceedings invalid.
Consequences of Natural Justice Violation: Orders passed in serious violation of natural justice principles are liable to be set aside. The court may quash the order and remand the matter for fresh proceedings from the stage where the defect occurred, ensuring that due process is followed.
Jurisdictional Error: When proceedings are initiated based on a fundamentally flawed SCN, it can also be considered an “error of jurisdiction,” as the proper statutory procedure for invoking jurisdiction was not followed.
Section 29 CGST Act (Cancellation of Registration): This case highlights the strict adherence required to procedural fairness under Section 29, which deals with cancellation of registration. Given the severe consequences of cancellation (inability to conduct business, loss of ITC), authorities must ensure all legal safeguards are met.

HIGH COURT OF CALCUTTA

Ed and F Man Commodities India (P.) Ltd.

Assistant Commissioner State Tax

T. S. SIVAGNANAM, CJ.
and CHAITALI CHATTERJEE (DAS), J.

MAT No. 611 OF 2025
IA NO. CAN 1 OF 2025

MAY 13, 2025

Somak Basu and Swagato Kabirajfor the Appellant. Tanoy Chakrabortyfor the Respondent.

ORDER

1. This intra court appeal by the writ petitioner is directed against the order dated 7^th April, 2025 in WPA 10537 of 2024.

2. In the said writ petition the appellant had challenged the orders passed by the original authority affirmed by the appellate authority by which the appellant’s registration under the provisions of the WBGST Act was cancelled with effect from 1^st July, 2017.

3. The challenge to the order of cancellation as well as the appellate authority’s order was on the ground of lack of jurisdiction and that the show cause notice was devoid of any reasons and the order passed by the original authority cancelling the registration was devoid of reasons and equally the order passed by the appellate authority.

4. Further, the appellant had approached the writ court earlier and during the pendency of the matter thought fit to approach the appellate authority, therefore, withdrew the writ petition and filed a statutory appeal and according to the appellant, the appellate authority also proceeded beyond the scope of show cause notice in placing reliance on an inspection report drawn on 14.12.2021 which was one-day prior to the date of the show cause notice which was waited 15.12.2021.

5. Therefore, it is submitted that the inspection report could not have been relied upon without copy being furnished to the appellant, more particularly when Rule 25 of the CGST Rules mandates with such report along with all material connected thereto should be uploaded within a period of 15 days which has not done.

6. The learned writ court has dismissed the writ petition and aggrieved over which, the appellant before this court.

7. We have elaborately heard the learned advocates for the parties and carefully perused the materials placed on record.

8. The scope of consideration of the grounds on which the appellant had challenged the impugned orders is limited in a proceedings under Article 226 of the Constitution though this court can at times examine the correctness of the appellate authority’s order as well as the original authority’s order by considering the merits of the matter since the dealers have invoked the extraordinary jurisdiction of this court under Article 226 of the Constitution on account of non-availability of statutory remedy before the tribunal because the tribunal is yet to be constituted.

9. However, in the instant case on perusal of the show cause notice dated 15.12.2021, we find the same is bereft of any particulars.

10. The appellant was granted time to submit the reply and appeared before the authority on 24.12.2021 at 12.10 p.m.

11. The appellant submitted its reply on 21.12.2021 while denying the allegation also requesting that they may be provided an opportunity to furnish additional submission.

12. However, on 22.12.2021 the registration has been cancelled without any reference to the appellant’s representation dated 21.12.2021.

13. In any event since the show cause notice did not contain any reasons, it is a notice which is nonest in the eye of law as the appellant did not have adequate opportunity to rebut the allegations against it since the allegations were not set out in the show cause notice.

14. This inherent defect goes to the root of the matter which cannot be cured or rectified at a subsequent stage or in the appellate stage.

15. Subsequently the appellant filed an application for revocation of the cancellation of registration for which show cause notice was issued on 19.4.2023 and on perusal of the same, we are unable to decipher anything out of the show cause notice since it does not clearly state as to what are the reasons for revocation.

16. Nonetheless, the appellant had submitted replies on 17.4.2023 and 26.4.2023.

17. Further, by representation dated 2^nd May, 2023 the appellant requested the matter be deferred since the writ petition was pending and they filed a supplementary affidavit in WPA 6411 of 2023.

18. However, the order came to be passed and subsequently the writ petition was withdrawn and the appellant resorted to the appellate remedy available under the Act. The appeal was rejected by order dated 30.11.2023 and on perusal of the internal page 8 of the order in paragraph 2 the appellate authority clearly refers to the inspection report dated 14.12.2021 which was drawn one-day prior to the issuance of the show cause notice and copy of which has not been furnished to the appellant.

19. These are all sufficient to hold that there has been serious violation of principle of natural justice and the appellant was not afforded any opportunity to put forth its contentions.

20. The learned Government counsel referred to an interim order passed during the pending of the writ petition dated 17.1.2025 submitted that the appellant did not challenge the said order.

21. In any event any interim order merges with the final order and the appellant has questioned the final order passed in the writ petition, it will be well open to the appellant to canvas all the grounds.

22. In the light of the above undisputed factual position, we have to hold that the initiation of the proceedings by issuance of the show cause notice is flawed.

23. Consequently, all subsequent proceedings have to fail on the ground of error of jurisdiction as well as on the ground of violation of principle of natural justice.

24. Having held so, the necessary corollary that has to follow is to remand the matter back to the original authority to decide the matter afresh after affording due opportunity to the appellant.

25. Accordingly, the appeal is allowed. The order passed in the writ petition is set aside. The writ petition is allowed. The orders impugned in the writ petition are set aside including the show cause notice dated 15.12.2021 with the direction to the adjudicating authority to issue a fresh show cause notice including copy of the inspection report dated 14.12.2021, afford reasonable time to the appellant to submit its written explanation along with supportive documents after which an opportunity of personal hearing be afforded to the authorized representative of the appellant and fresh orders be passed on merits and in accordance with law.

26. The appellant will be entitled to canvas all grounds both factual and legal including the ground that retrospective cancellation of the registration could not have been done.

27. The appellant shall cooperate in the disposal of the proceedings and no request for adjournment shall be entertained.