Delhi HC Rejects GSTIN Cancellation Because the SCN Lacks Information About the Personal Hearing

The cancellation of GST registration for M/S. Rajdhani Trading Co., citing a violation of natural justice has been overturned by the Delhi High Court. The court’s judgment stresses the importance of procedural fairness specifically the need for a clear personal hearing procedure.

The writ petition is towards M/S Rajdhani Trading Co., a business registered under GST since July 29, 2021. The company encountered problems when its GST registration was cancelled by an order on May 30, 2022. This cancellation occurred after the company failed to file GST returns for 6 consecutive months, pressing the authorities to allocate a Show Cause Notice (SCN) dated May 19, 2022. 

According to SCN, M/S Rajdhani Trading Co. was directed to respond within 7 working days. Also, it suspended the GST registration of the company effective from the SCN date. The SCN did not determine a date, time, or venue for a personal hearing, which is an influential procedural oversight.

A GST registration cancellation occurred when the applicant, M/S Rajdhani Trading Co., lost an answer to SCN. From 31st July 2021, the registration was cancelled. 

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Mr. Pranay Jain and Mr. Karan Singh have represented the applicant and claimed that being a bone fide assessee it settled the whole tax obligation. The company has asked for the restoration of its GST registration arguing that without it, doing the business was not intended.

The respondent revenue, the Principal Commissioner of the Department of Trade and Taxes, Government of NCT of Delhi, represented by Mr Avishkar Singhvi, Mr Shubham Kumar, Mr Vivek Kumar Singh, and Mr Naved Ahmed argued that the GST registration cancellation was explained as of the failure of the applicant to follow the legal requirements by not filing returns for 6 months. However, they admitted that the absence of a clear personal hearing schedule in the SCN violated the principles of natural justice.  

It was held by the court that the lapse in the procedure didn’t validate the cancellation order and mandated the GST registration restoration for M/S Rajdhani Trading Co.  

It was asked to file the GST returns of the applicant company and clear all dues within 4 weeks. Also, it was needed to pay any penalties that were levied. Unable to adhere within the mentioned time duration shall result in the restoration order revocation.

It was emphasized by the court that all the regulatory notices are required to have detailed instructions for the personal hearings to ensure a fair procedure. The ruling indeed explains that the respondents possess the correct to begin the subsequent proceedings for non-compliance or recovery of the additional amount when needed.

Consequently, the impugned order has been set aside by the division bench including Justice Vibhu Bakhru and Justice Sachin Datta, and asked the registration of the applicant to be restored immediately.