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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Ottimo Visuals – Appellant
Versus
Commissioner of Gst, Delhi West & Ors. – Respondents
W.P.(C) 6991 of 2023
Decided On : 16-08-2023
GST Registration - Cancellation - [Non-compliance with GST Act or Rules] - [Section 29(2) of the CGST Act, 2017] - The court set aside the impugned show cause notice, cancellation order, and rejection of revocation application, emphasizing the need for clear reasons in show cause notices and proper consideration of the petitioner's submissions.
Fact of the Case:
The petitioner challenged the cancellation of its GST registration with retrospective effect, citing the demolition of its previous business premises and the subsequent shift to a new location.
Finding of the Court:
The court found that the show cause notices and orders lacked clarity and failed to consider the petitioner's explanations and supporting documents.
Issues: Clarity of show cause notices, Consideration of petitioner's submissions, Existence of business premises
Ratio Decidendi: Show cause notices must clearly indicate reasons, Orders should consider petitioner's submissions and evidence, Existence of business premises is a relevant factor in GST registration cancellation.
Final Decision: The court set aside all impugned notices and orders, allowing the petitioner to respond to a fresh show cause notice if issued by the respondents.
JUDGMENT
Vibhu Bakhru, J. The petitioner has filed the present petition, impugning a show cause notice dated 07.07.2022 (hereafter `the impugned show cause notice') proposing the cancellation of the petitioner's GST registration. The petitioner also impugns the order dated 18.08.2022 cancelling its GST registration passed pursuant to the impugned SCN. The petitioner had applied for revocation of the order cancelling its GST registration on 12.09.2022, however, the said application was also rejected by an order dated 13.10.2022. The petitioner impugns the said order as well.
2. The respondents issued the impugned show cause notice on 07.07.2023 proposing to cancel to the petitioner's GST registration for the following reasons.
"Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed."
3. The petitioner was directed to appear before the proper officer on 25.07.2022 at 11:00 a.m. and to file a reply within a period of seven working days from the date of the service of the said show cause notice. The petitioner neither filed a reply nor appeared before the proper officer. On 18.08.2022, the proper officer passed an order cancelling the petitioner's GST registration. Curiously, the said order refers to a reply dated 16.07.2022 purportedly sent by the petitioner to the impugned show cause notice. However, it appears that the said reference is on account of some technical glitch and, in fact, no reply was furnished by the petitioner. The said order dated 18.08.2022 records the reason for cancelling the petitioner's GST registration in the following words:
"1. Cancellation was initiated as the taxpayer/firm was found non-existent at their registered principle place of business on physical verification. Taxpayer neither attended PH nor replied to query raised and further no reply received no tax deposited as informed by this office letters dated 23.05.2022 & dated 28.04.2022. Accordingly, GST registration is hereby cancelled. Your duty, penalty and interest liabilities will stand as it is, including filing of GSTR-10 (annual returns) within 3 months of the cancellation of registration. Thereof as applicable is still due on you and you are hereby advised to deposit the same. If not, suitable action as per law will be initiated against you."
4. It is important to note that the petitioner's GST registration was cancelled with retrospective effect from 02.07.2017. It is also relevant to note that the tabular statement indicating the amount of tax recoverable from the petitioner as reflected in the impugned order dated 18.08.2022 records the tax payable as nil.
5. It is the petitioner's case that it had shifted its place of business in Delhi to Shop No.10, Property No. 11/35-B, First Floor, Tilak Nagar, New Delhi in the month of July, 2021. The petitioner had also explained that the earlier premises, where it was carrying on its business, was destroyed by the Northern Railways and therefore the petitioner was compelled to shift from the said premises.
6. Aggrieved by cancellation of its GST registration with retrospective effect, the petitioner filed an application seeking revocation of the order dated 18.08.2022 cancelling its GST registration. On receipt of the said application dated 12.09.2022, the concerned officer issued a show cause notice dated 23.09.2022 proposing to reject the petitioner's application for following reasons:
"Any Supporting Document - Document Upload - Document not legible"
7. The petitioner was also called upon to file a reply within a period of seven working days from the date of the said notice and directed to appear before the concerned authority on 29.09.2022 at 11:00 a.m.
8. There is a controversy whether the petitioner had, in fact, appeared before the concerned officer. Whilst the order dated 29.09.2022 passed by the concerned officer records that the petitioner did not appear on the given date; the stand in the counter affidavit is to the contrary. In t
Clarity in show cause notices and consideration of petitioner's submissions are essential in GST registration cancellation proceedings.
A Show Cause Notice must specify the reasons for proposed action to enable a meaningful response, and decisions must provide an opportunity to be heard and indicate alleged statutory violations.
Show cause notices must specify reasons for adverse actions to comply with natural justice principles, and vague reasons for rejecting revocation applications are unsustainable.
A show cause notice must be valid and specific in stating the reasons for proposing cancellation, and the petitioner must be provided with an opportunity to respond to the allegations.
Cancellation of GST registration with retrospective effect must be based on objective criteria and proper notice, and the proper officer must consider all relevant aspects before passing such orders.
Cancellation of GST registration must follow due process, including a clear show-cause notice and a reasoned order, to uphold the principles of natural justice.
Cancellation of GST registration with retrospective effect should be based on objective criteria and warranted consequences, and the respondents are not precluded from taking steps for recovery of an....
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