High Court Sets Aside GST Registration Cancellation Due to Violation of Natural Justice

Case Name:

W.P.(C) 15843/2023 - M/S AAIRA BATTERIES vs. PRINCIPAL COMMISSIONER OF DEPARTMENT OF TRADE TAXES, GOVERNMENT OF NCT OF DELHI (High Court of Delhi)

Key Takeaways:

1. Cancellation of GST registration should adhere to the principles of natural justice.

2. Show-cause notices for cancellation must provide specific details and reasons for the proposed action.

3. The cancellation order should specify reasons and particulars of the alleged violations.

4. Affording the petitioner an opportunity to be heard is essential in such cases.

5. The restoration of GST registration does not absolve the petitioner from complying with all provisions of the law.

A judgment from the High Court of Delhi at New Delhi, dated 11th December, 2023, regarding the case W.P.(C) 15843/2023 between M/S AAIRA BATTERIES (the petitioner) and the PRINCIPAL COMMISSIONER OF DEPARTMENT OF TRADE TAXES, GOVERNMENT OF NCT OF DELHI (the respondent).

The petitioner had filed a petition challenging the cancellation of its Goods and Service Tax (GST) registration by the respondent. The court found that the cancellation of the petitioner’s GST registration was done in violation of the principles of natural justice and, therefore, set aside the impugned order and directed the respondent to restore the petitioner’s registration.

Here is a summary of the key points mentioned in the judgment:

1. The petitioner’s GST registration was cancelled by the respondent through an order dated 20.09.2021.

2. The respondent issued a Show Cause Notice to the petitioner on 25.08.2021, proposing to cancel the registration due to alleged violations related to the issuance of invoices and bills without the supply of goods and/or services, leading to wrongful availment or utilization of input tax credit or refund of tax.

3. The show-cause notice did not provide specific details such as the specific invoices or bills, the period during which such invoices were issued, or the quantum of the input tax credit wrongfully availed or the refund of tax collected on account of bills issued without the supply of goods.

4. The impugned order cancelling the petitioner’s registration did not specify any reasons for cancellation and did not mention particulars of the invoice or transactions which were contrary to or in violation of the provisions of the Act.

5. The court found that the show-cause notice was bereft of necessary particulars to enable the petitioner to respond with clarity and that the petitioner was not afforded any opportunity of being heard.

6. The court also noted that the impugned order was bereft of any reasons and did not mention particulars of the invoice or transactions which were contrary to or in violation of the provisions of the Act.

7. The court allowed the petition, set aside the impugned order, and directed the respondent to restore the petitioner’s registration, clarifying that the order would not absolve the petitioner from complying with all provisions of the law and would not preclude the respondent from taking any further steps if it is found that the petitioner has violated any provisions of the law.

This judgment highlights the importance of following the principles of natural justice and providing specific details and reasons when taking administrative actions such as cancelling a GST registration.

FAQ:

Q1: What was the outcome of the case?

A1: The High Court set aside the cancellation of the petitioner’s GST registration and directed the respondent to restore the registration.

Q2: What were the key reasons for setting aside the cancellation?

A2: The court found that the cancellation was done in violation of the principles of natural justice, and the show-cause notice and the cancellation order lacked specific details and reasons for the proposed action.

Q3: What are the implications of the judgment?

A3: The judgment emphasizes the importance of following the principles of natural justice and providing specific details and reasons when taking administrative actions such as cancelling a GST registration.

CM APPL. 63788/2023 (for exemption)

1. Exemptions allowed, subject to all just exceptions.

2. The application stands disposed of.

W.P.(C) 15843/2023

3. Issue notice.

4. Mr. Rajeev Aggarwal, learned counsel for the respondent, accepts

notice.

5. The petitioner has filed the present petition, inter alia, impugning an

order dated 20.09.2021 (hereafter ‘the impugned order’), whereby the

petitioner’s Goods and Service Tax (‘GST’) registration was cancelled. The

petitioner prays that the respondent be directed to restore the same.

6. The petitioner was registered with the GST authorities on 01.09.2018

and was assigned Goods and Service Tax Identification Number (‘GSTIN’),

07CKZPA5219E1Z2.

7. On 25.08.2021, the respondent issued a Show Cause Notice,

proposing to cancel the petitioner’s registration for the following reasons:

“1 Issues any invoice or bill without supply of goods and/or services in

violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax.”

8. The petitioner was also called upon to furnish a reply to the aforesaid

notice, within a period of seven working days and to appear before the

concerned Officer. Additionally, the petitioner’s registration was suspended

with effect from the date of the said notice, that is, with effect from

25.08.2021.

9. Although, the petitioner was called upon to appear before the

concerned Officer, the aforesaid show cause notice neither indicated the

venue nor the date and time when the petitioner was required to appear.

10. It is also apparent that, although an allegation was made that the

petitioner had issued invoices and bills without supply of goods, in violation of the provisions of the Act, the show-cause notice did not mention any specific invoices or bills. It also did not provide any other details such as the period during which such invoices were issued, which could identify the bills alleged to have been raised without supply of goods.

11. The show-cause notice also alleged that the issuance of such bills led

to wrongful availment or utilisation of the Input Tax Credit (‘ITC’) or

refund of tax, however, it did not specify either the quantum of the ITC

wrongfully availed or the quantum of refund of tax collected on account of

bills issued without supply of goods.

12. Pursuant to the show-cause notice, the respondent proceeded to cancel

the petitioner’s GST registration by the impugned order. The said order did

not specify any reasons for cancellation of the petitioner’s GST registration except mentioning that no reply to the aforementioned show-cause notice was received.

13. It is important to note that the tabular statement set out in the said

order indicated that no Central tax/ State tax/ UT tax/ Integrated tax or cess was ascertained as due and payable by the petitioner.

14. We are of the view that the said show-cause notice is bereft of the

necessary particulars so as to enable the petitioner to respond to the same

with any clarity. Further, the petitioner was not afforded any opportunity of being heard. This is because, even though the show-cause notice called

upon the petitioner to appear for a personal hearing, it did not specify the

date, time or the venue of such hearing.

15. The impugned order is also bereft of any reasons. It also does not

mention particulars of the invoice or transactions which, according to the

concerned authority, are contrary to or in violation of the provisions of the Act.

16. Mr. Rajeev Aggarwal, learned counsel appearing for the Revenue submits that the present petition is delayed as the petitioner has filed the petition, more than two years after the impugned order cancelling the

petitioner’s GST registration, was passed. He also submits that the petitioner has not provided any clues as to the business or transactions carried out during the period of two years.

17. Although the petitioner has not approached this Court immediately after receiving the impugned order, we do not find that the delay is pernicious to the petitioner’s claim for restoration of the GST registration. As is apparent from the above, the impugned order cancelling the petitioner’s registration was passed in violation of the principles of natural justice and is, thus, liable to be set aside.

18. If the petitioner’s GST registration is restored, the petitioner would be obliged to update its returns for the period, after its GST registration was cancelled. This would enable the Department, not only examine the business carried out by the petitioner but any and every transaction entered into by the petitioner. This would address Mr Agarwal’s concern that the petitioner has not disclosed the transactions or the business carried out after its GST registration was cancelled.

19. In view of the above, the petition is allowed. The impugned order, cancelling the petitioner’s GST registration is set aside. The respondent is

directed to forthwith restore the petitioner’s registration.

20. It is clarified that this order will not absolve the petitioner in

complying with all provisions of the law. It also does not preclude the

respondent from taking any further steps, if it is found that the petitioner has violated any of the provisions of law.

21. The petition is disposed of in the aforesaid terms.

22. The Central GST authorities are also directed to ensure that this order

is complied with.

VIBHU BAKHRU, J

AMIT MAHAJAN, J

DECEMBER 11, 2023