Delhi HC: GSTIN Cancellation Order Issued in Violation of Principles of Natural Justice

The order cancelling the GST registration of the applicant was passed in breach of the principles of natural justice and is therefore obligated to be set aside, Delhi High Court ruled.

The judicial bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan noted that if the petitioner’s GST registration is reinstated, the petitioner would need to update its returns for the period after the cancellation. This action would allow the Department to scrutinize not just the petitioner’s business activities but also all transactions conducted during that period. It aims to address the Department’s concern regarding the petitioner’s non-disclosure of transactions or business operations following the cancellation of its GST registration.

The petitioner contested an order that revoked its Goods and Service Tax (GST) registration. Seeking a directive for the restoration of the GST registration, the petitioner challenged this decision.

The respondent, or the department, issued a show-cause notice proposing the cancellation of the petitioner’s registration. The rationale behind this cancellation was the issuance of invoices or bills without actual supply of goods and/or services, violating the provisions of the Act or its related rules. This infringement resulted in wrongful claiming of input tax credit or tax refund.

The petitioner was summoned to respond to the notice within seven working days and to attend before the relevant officer. Moreover, the petitioner’s registration was suspended starting from the date of the notice, which was August 25, 2021.

Despite the accusation that the petitioner had issued invoices and bills without actual goods supplied, breaching Act provisions, the show-cause notice lacked specifics. It omitted details like specific invoices, their issuance period, or any identifiable information about these alleged bills issued without the provision of goods.

The notice claimed that these bill issuances led to wrongful utilization of input tax credits (ITC) or tax refunds. However, it failed to specify the extent of wrongfully claimed ITC or the amount of tax refund associated with the bills issued without goods supplied.

The respondent under the show cause notice has moved to cancel the applicant’s GST registration by the impugned order. The order does not cite any cause for the cancellation of the applicant’s GST registration rather than specifying that no response to the show cause notice was obtained.

The court observed that the show-cause notice lacked crucial details essential for the petitioner to adequately respond. There was no chance given for the petitioner to present their side. Despite requesting the petitioner’s presence for a hearing, the notice failed to mention the date, time, or location.

Consequently, the court deemed the cancellation of the petitioner’s registration as a breach of natural justice principles, necessitating its overturning.