Delhi HC: Cancelling GSTIN without Providing a Reason is Not a Viable Solution

In the case of Singla Exports v. Central Board of Indirect Taxes and Customs & Ors [W.P.(C) 2732 of 2023 dated August 09, 2023], the Delhi High Court overruled the order of the cancellation of the GST registration due to inadequate reasons in the auto-generated order.

Main Facts:

The petitioner, M/s. Singla Exports decided to cease business operations and applied to cancel its GST registration, effective from April 30, 2022.

The Revenue Department issued a Show Cause Notice (SCN) dated May 05, 2022 (“the Impugned SCN”) to the Petitioner, requesting documents and details.

The Revenue Department did not process the Petitioner’s application, as the appropriate response had not been provided by them concerning the Impugned SCN asking for further information.

Subsequently, the Revenue Department issued an order dated June 10, 2022 (“the Impugned Order”) cancelling the Petitioner’s GST Registration, effective from July 02, 2017.

The Petitioner challenged the Impugned Order by filing a writ before the Delhi High Court.

What is the Issue:

Is it under the law to cancel GST registration without giving proper reasons in the cancellation order?

Delhi High Court Ruled:

In W.P.(C) 2732 of 2023, the Delhi High Court ruled as follows:

Stated that it’s a settled law for an SCN to outline reasons for any actions, asking the petitioner to respond.

The court observed that the Impugned Show Cause Notice (SCN) could not provide an appropriate response. Consequently, the Impugned order based on inadequate reasons, SCN couldn’t be sustained on the same grounds. The only reason stated in the Impugned order for cancelling the Petitioner’s GST registration was their failure to respond to the Impugned SCN and not attend a personal hearing.

Noted that the impugned order did not explain the alleged statutory violations resulting in the cancellation of the GST registration, and it wasn’t undisputed that the Petitioner received a notice of a personal hearing.

Nullified the Impugned Order of GST registration cancellation.

The Court instructed the GST Revenue Department to review the case. The Petitioner was ordered to submit documents in response to the May 17, 2022 SCN within two weeks.