Order Cancelling GST Registration Was Passed In Violation Of Principles Of Natural Justice: Delhi High Court

The Delhi High Court has held that the order cancelling the petitioner's GST registration was passed in violation of the principles of natural justice and is, thus, liable to be set aside.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that 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 to examine not only the business carried out by the petitioner but any and every transaction entered into by the petitioner. It would address the department's concern that the petitioner has not disclosed the transactions or the business carried out after its GST registration was cancelled.

The petitioner has challenged an order in which the petitioner's Goods and Service Tax (GST) registration was cancelled. The petitioner has sought direction for the restoration of the GST registration.

The respondent or department issued a show cause notice, proposing to cancel the petitioner's registration. The reason for cancellation was that the invoice or bill was issued 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.

The petitioner was also called upon to furnish a reply to the 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 notice, that is, with effect from August 25, 2021.

Although an allegation was made that the petitioner had issued invoices and bills without the 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 the supply of goods.

The show-cause notice alleged that the issuance of bills led to wrongful availment or utilization 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.

Pursuant to the show-cause notice, the respondent proceeded to cancel the petitioner's GST registration by the impugned order. The order did not specify any reasons for the cancellation of the petitioner's GST registration except for mentioning that no reply to the show-cause notice was received.

The court noted that show-cause notice is bereft of the necessary particulars so as to enable the petitioner to respond to the same with any clarity. The petitioner was not afforded any opportunity to be 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 venue of such a hearing.

The court held that the order cancelling the petitioner's registration was passed in violation of the principles of natural justice and is, thus, liable to be set aside.

Counsel For Petitioner: Pranay Jain

Counsel For Respondent: Rajeev Aggarwal

Case Title: M/S Aaira Batteries Versus Principal Commissioner Of Department Of Trade Taxes, Government Of NCT Of Delhi

Citation: 2023 LiveLaw (Del) 1355

Case No.: W.P.(C) 15843/2023

Click Here To Read The Order