Rejection Of Application For Voluntary Cancellation Of GST Registration Didn't Contain Reasons: Bombay HC Quashes Rejection Order
The Bombay High Court ruled that since the revocation orders for registration cancellation on petitioner's application were passed contrary to principles of natural justice, all the subsequent proceedings initiated thereafter, which are consequential, shall be quashed.
“Before the revocation of cancellation of registration, the Petitioner was not supplied with the documents on the basis of which its application for cancellation of registration was rejected, which is contrary to the principles of natural justice”, observed the Division Bench of Justice M. S. Sonak and Justice Jitendra Jain.
Facts of the case
In June 28, 2021, the CGST Authority issued a registration certificate to Respondents in Form GST REG-06. However, on May 09, 2023, the petitioner/ assessee voluntarily applied to cancel the registration in Form GST REG-16. Pursuant to this application, the CGST Authorities cancelled the petitioner's registration. Later, on Feb 20, 2024, the CGST sent an email to the petitioner stating that the cancellation order was revoked pursuant to the orders received from the Appellate Authority / Higher Authority for restoration of the cancellation order. On the same day, an order was passed rejecting the petitioner's application for voluntary cancellation of registration dated May 09, 2023.
Thereafter, on Feb 26, 2024, CGST authority issued a show cause notice to the petitioner as to why the registration should not be cancelled on account of the same having been obtained by means of fraud, wilful misstatement, or suppression of facts as per Sec 29(2)(e) of CGST Act, 2017. Later, on March 08, 2024, an order was passed for cancellation of registration with retrospective effect from June 27, 2020. On being objected to by the petitioner, it was replied by the Dy Commissioner of CGST that the registration cancelled was restored and subsequently cancelled ab initio as directed by the State GST Authorities.
When the petitioner was informed by CGST Authorities to obtain an NOC from the State GST Authorities for revocation of cancellation of registration, the petitioner approached the High Court.
Observation of the High Court
The Bench noted that the petitioner's application for voluntary cancellation of registration was accepted by Respondents, and the cancellation was made effective from May 08, 2023.
After almost 10 months, without giving any hearing or show cause notice for revocation of the voluntary cancellation of registration, Respondents revoked the cancellation on the ground that same is done pursuant to the orders received from Appellate Authority / Higher Authority, added the Bench.
However, the Bench found that who this Appellate Authority/ Higher Authority was or what the order made was nowhere disclosed to the petitioner at that time but much after the cancellation order was made.
The Bench stated that it was incumbent upon the Respondents to have issued a show cause notice for revocation of cancellation of registration before passing the order.
Having not issued any show cause notice, the restoration of voluntary cancellation of registration is contrary to the principles of natural justice, added the Bench.
Even though Form GST REG-05 rejecting the application for voluntary cancellation of registration stated for reasons, the Bench found that the said Form does not contain any reasons and the space following the phrase “following reason” is blank.
Therefore, the rejection of the application for voluntary cancellation of registration is contrary to the principles of natural justice since it does not contain any reasons, and the omission is indicative of non-application of mind, added the Bench.
Hence, the High Court quashed the order only because the decision-making process was flawed.
However, since there was failure of natural justice, the High Court granted liberty to the Respondents to proceed in accord with the law.
Further, accepting the apprehension of the Respondent that petitioner may utilise the ITC to its credit and try to render the further proceedings infructuous, the High Court restrained the petitioner from utilising this ITC for some reasonable period during which the respondents would have to conclude their proceedings.
Counsel for Petitioner/ Assessee: Sujit Sahoo
Counsel for Respondent/ Revenue: S. D. Vyas, Dhruti Kapadia, Ram Ochani and Abhishek R. Mishra
Case Title: Om Impex versus The State of Maharashtra & ors
Case Number: Writ Petition No.11541 OF 2024