Appeal against retrospective cancellation of registration restored and to be heard on merits as assessee had no knowledge of SCN.

Retrospective GST registration cancellation appeal, dismissed on limitation, is restored on merits with costs due to unserved SCN and denial of natural justice.

Issue:

Whether an appeal challenging the retrospective cancellation of GST registration, which was initially dismissed on grounds of limitation, should be restored for hearing on merits by a High Court, when the assessee claims they had no knowledge of the original show cause notice (SCN) and thus no opportunity to participate in the proceedings, leading to a violation of natural justice.

Facts:

• A show cause notice (SCN) was issued to the assessee, seeking to cancel their GST registration.
• The assessee contended that they did not have knowledge of this SCN and, consequently, did not participate in the proceedings.
• Following these ex parte proceedings, the assessee’s GST registration was cancelled with retrospective effect.
• The assessee filed an appeal before the appellate authority against this cancellation order.
• However, this appeal was dismissed by the appellate authority on the grounds of limitation.
• The assessee’s core argument was that the SCN was never served upon them, denying them the opportunity to file a reply or participate, which constitutes a violation of natural justice.
• The assessee cited a previous High Court judgment in Blackmelonadvance Technology Company (P.) Ltd. v. Commissioner of State Goods and Services Tax Delhi (Delhi), where in similar circumstances (lack of knowledge of SCN), an opportunity was afforded to the petitioner.

Decision:

The court held in favor of the assessee. Relying on its previous judgment in Blackmelonadvance Technology Company (P.) Ltd., the court observed that since the petitioner (assessee in the current case) did not have knowledge of the SCN, an opportunity ought to be afforded. Accordingly, the assessee’s appeal in the instant case was directed to be heard on merits, subject to a cost of Rs. 20,000/-. Therefore, the appeal was restored.

Key Takeaways:

• Principles of Natural Justice: Effective Service and Opportunity to be Heard: The fundamental principle that “nobody should be condemned unheard” is paramount. If a show cause notice, which is the very foundation of adverse proceedings, is not effectively served and the assessee has no knowledge of it, any subsequent order is in clear violation of natural justice.
• Retrospective Cancellation – Higher Scrutiny: Retrospective cancellation of GST registration has severe financial implications for the assessee (e.g., ITC reversal, deemed supply) and their recipients. Therefore, courts apply higher scrutiny to ensure due process is strictly followed for such cancellations.
• Condonation of Delay in Appeal – Due to Lack of Notice: When an assessee is genuinely unaware of the original SCN and the order, the period of limitation for filing an appeal effectively starts from the date of their actual knowledge. High Courts often exercise their extraordinary powers to condone such delays to prevent grave injustice.
• Precedent Value: The court’s reliance on its own previous decision in Blackmelonadvance Technology Company (P.) Ltd. indicates a consistent judicial approach to similar issues where lack of proper notice results in a denial of fundamental rights.
• Restoration of Appeal on Merits with Costs: The court not only allowed the appeal to be heard but also imposed a cost. This serves to compensate the department for procedural delays, while still ensuring the assessee gets their day in court to argue the merits of the retrospective cancellation.
• Importance of Proper Service Records: This judgment highlights the critical need for tax authorities to maintain impeccable records of service of SCNs and orders, as a failure to prove proper service can lead to the reopening of even time-barred appeals.