GST: Madras HC Directs Respondents to Issue a New SCN, No Hearing Opportunity Was Given

The Madras High Court has nullified the decision to revoke the Goods and Service Tax registration without affording the petitioner an opportunity for a hearing. The court has instructed the respondents to issue a new show cause notice under the law within a three-week timeframe.

The petitioner, Mr. V S K Traders & Services, contested the cancellation order dated 23.01.2023, retroactively effective from 31.12.2022. Having been a registered entity under the GST system, the petitioner claimed to have consistently filed the required monthly returns up until March 2022.

Due to the adverse impact of the COVID-19 pandemic on the petitioner’s business, there was a six-month period with no outward supply. Subsequently, as the business began recovering post-pandemic, the petitioner was taken aback to discover the cancellation of their GST registration.

The petitioner’s counsel contended that although the show cause notice was uploaded on the GST portal, it was not directly communicated to the petitioner. As a small business owner, the petitioner remained unaware of the notice on the portal, rendering them unable to respond.

Highlighting the flaws in the impugned order, the counsel emphasized its mechanical issuance, evident in the reference to a reply dated 04.10.2022 in the first line, followed by a contradictory statement in the second line claiming no reply was given.

The counsel also pointed to sub-rule (4) of Rule 22 of the CGST Rules, which empowers the authority to halt cancellation proceedings if the registered person takes appropriate remedial action.

Representing the respondent, Mr K Mohanamurali acknowledged receiving the notice and clarified that the petitioner’s GST registration was cancelled under Section 29(2)(b) and (c) of the relevant GST Provisions.

Justice Senthilkumar Ramamoorthy, presiding over the single bench, observed that the process was mechanical. Given that the impugned order significantly prejudiced the petitioner without affording a fair opportunity to respond, the court deemed it necessary to intervene.

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The court directed the respondents to issue a new show cause notice within three weeks. The petitioner is instructed to submit a reply within two weeks of receiving the notice. Ultimately, the court granted the writ petition, nullifying the order that cancelled the petitioner’s GST registration.