Delhi HC Quashes GSTIN Cancellation Order as Issued Without Any Reason

In a recent case, the Delhi High Court overturned a GST registration cancellation order that had been issued without providing a clear reason. The petitioner, Vijay Sales Enterprises, challenged an order dated December 2, 2022, where the respondent had retroactively cancelled the petitioner’s GST registration, originally granted on December 12, 2019.

The petitioner had initially applied for the cancellation of the GST registration, requesting it to be effective from July 31, 2022, due to the discontinuation of its business operations. Following this application, the concerned officer issued a notice on August 3, 2022, asking the petitioner to submit certain documents, which the petitioner failed to provide.

On August 26, 2022, the concerned officer rejected the petitioner’s application for GST registration cancellation, citing the petitioner’s failure to furnish the required documents. Subsequently, on August 30, 2022, the concerned officer issued a show-cause notice, asking the petitioner to explain why their registration should not be cancelled.

The reason mentioned in the Show Cause Notice for the proposed GST registration cancellation was, “In case registration has been obtained using fraud, willful misstatement, or suppression of facts.”

On September 7, 2022, the petitioner responded to the Show Cause Notice, denying any involvement in fraud, misstatement, or the suppression of facts. The petitioner also requested a postponement of the hearing date to allow for attendance. However, the concerned officer issued the impugned order, cancelling the petitioner’s GST registration retrospectively.

It was evident that the impugned order violated the principles of natural justice. The Show Cause Notice did not specify the grounds on which the petitioner’s GST registration was proposed to be cancelled. It merely mentioned, “In case registration has been obtained using fraud, willful misstatement, and suppression of facts,” without specifying the alleged fraudulent actions committed by the petitioner.

The Show Cause Notice lacked clarity and did not provide the petitioner with sufficient information to respond meaningfully. The petitioner had consistently denied any involvement in fraud, misstatement, or the suppression of facts.

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A division bench consisting of Justice Vibhu Bakhru and Justice Amit Mahajan found that the impugned order lacked reasoning and simply stated that the petitioner’s response was unsatisfactory.

Neither the Show Cause Notice nor the impugned order offered any insight into the reasons for cancelling the petitioner’s GST registration. As a result, the court set aside both the Show Cause Notice and the impugned order.