Delhi HC Directs GST Commissioner to Give Proper SCN and Hearing Opportunity to the Petitioner

The legal dispute between Radhey Trading Company and the Principal Commissioner of Goods and Service Tax has emerged as a significant matter before the Delhi High Court, specifically dealing with the retrospective cancellation of GST registration. In its verdict, the court underscored the crucial need for comprehensive details in both the show cause notice and the cancellation order.

Radhey Trading Company, having obtained GST registration on 12.05.2022 as a purported supplier of plastic granules and PVC Dana, faced a show-cause notice issued on 10.07.2023. The notice sought cancellation under Section 29(2)(e) of the Goods & Services Tax Act, 2017, alleging registration through fraudulent means, willful misstatement, or suppression of facts.

Upon careful scrutiny, a critical analysis exposed significant deficiencies in both the show cause notice and the subsequent cancellation order. The notice lacked specificity regarding the purported fraud or misstatement, and notably, it failed to inform the petitioner of the retrospective cancellation.

The cancellation order, dated 25.08.2023, was devoid of reasoning, details, or discussion, simply stating the effective date as 13.05.2022. The court, deeming both the notice and order unsustainable, underscored the importance of self-containment, emphasizing that they should not necessitate visits to online portals for information.

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In response to the respondent’s argument that online portals contained detailed reasons, the court insisted that the notice and order must be self-explanatory. Authorities were directed to rectify errors on the online portal and ensure that the show cause notice or order includes all necessary details.

The respondent contended that the cancellation was warranted based on an Inspector’s report citing the petitioner’s address as untraceable. Disputing this claim, the petitioner affirmed the existence of the registered address and sought a reexamination for verification.

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Despite applying for the revocation of cancellation on 13.09.2023, the authorities had yet to reach a decision. Acknowledging the flawed basis of the proceedings, the court nullified both the show cause notice and the cancellation order. Emphasizing the significance of a well-founded show cause notice and affording the petitioner an opportunity before any subsequent action, the court stressed procedural fairness.

The verdict of the Delhi High Court in the case of Radhey Trading Company underscores the imperative of transparency and specificity in both show-cause notices and cancellation orders.

Through its meticulous examination, the court ensures that the cancellation of GST registration, particularly when applied retrospectively, adheres to objective criteria and provides a fair opportunity for the taxpayer. This judgment serves as a reminder of the legal prerequisites for cancellation actions undertaken by tax authorities.