Delhi HC: Authority Can’t Allocate SCN Based on Any Allegations of Misstatement Causes for GST Reg. Cancellation

The Delhi High Court after discovering that the Show cause notice issued to the applicant does not position any intelligible causes for the GST registration cancellation, quashes the Show cause notice.

The HC encountered that SCN issued to the applicant, specifying the provision of Section 29(2)(e) of the CGST Act, 2017 which governs the proper officer to cancel the GST registration of the taxpayer if it is received via fraud, wilful misstatement, or suppression of facts, without indicating any specific fact of allegation. 

The Division Bench of Justice Vibhu Bakhru and Justice Sachin Datta kept that “The impugned SCN did not indicate any alleged fraud or mention any statement, which is alleged to be a wilful misstatement. It also did not set out any facts, which are alleged to have been suppressed by the petitioner”.

Case Facts

The applicant asked to show cause why the GST registration must not be cancelled. Answering that the applicant furnished an applicant asking for the revocation of the cancellation order. Under the mentioned application the respondent/department has furnished a Show cause notice (SCN) asking the applicant to show cause as to why its application for the revocation of cancellation orders not be abandoned. 

The application for the revocation of the cancellation order was rejected as the applicant neither answered the show cause notice nor appeared before the related proper officer on the assigned date and time.

Therefore the applicant has approached the High Court. Remarking on the High Court first, the Bench remarked that the cancellation order was issued in breach of the principles of natural justice. 

Also, the Bench remarked that the SCN which was passed under the application for the revocation of the applicant of the cancellation order, specifies two causes for denying the mentioned application and for keeping the cancellation order.

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The initial reason for the denial of the revocation application was that the applicant’s principal place of business address was incomplete and could not be located, the Bench cited.

The Bench noted that the second reason for the rejection of the revocation application was that the applicant had depicted a bigger turnover within two months and the whole GST was filed via claiming the ITC. After the query of the proper officer regarding the genuineness of the said transaction and seeking the applicant to provide the information of that, the applicant’s counsel has confined the petition to ask for a chance to answer to the mentioned allegations, Bench mentioned. 

The order through which the applicant’s application for revocation of the cancellation order was denied has been quashed by the High Court since it is not able to test the natural justice to allow the applicant to answer to the allegations in the show cause notice. Therefore the High Court disposed of the case by replying to the question of law in the taxpayer’s favour.