GST Cancellation Order Set Aside for Breach of Natural Justice

The Gauhati High Court recently set aside the cancellation of GST registration of a proprietor after finding that the Show Cause Notice (SCN) issued by the department was vague and failed to provide adequate particulars regarding the alleged default. Justice Soumitra Saikia, while allowing the writ petition filed by Nijumoni Gogoi, held that cancellation of registration without granting a proper opportunity of hearing violates the principles of natural justice.

The dispute arose after the petitioner’s GST registration was cancelled by an order dated 01.09.2024 on the ground of non-filing of GST returns for a continuous period of six months. The petitioner challenged the action before the High Court contending that the SCN issued by the department was cryptic in nature and did not specify the exact tax periods for which returns were allegedly not furnished. It was further argued that the cancellation order had been passed without granting any personal hearing to explain the circumstances behind the delay in compliance. The Court Hilighted that :

“A vague and non-specific show cause notice deprives the assessee of an effective opportunity to furnish a proper reply.”

Before the Court, the Revenue defended the cancellation by relying upon the provisions relating to cancellation of registration for statutory non-compliance under the CGST Act and Rules. However, the Court observed that the impugned notice merely alleged non-filing of returns without disclosing the precise details necessary for the petitioner to effectively respond to the allegations.

The High Court further held that cancellation of GST registration directly affects the petitioner’s right to continue business, and therefore strict adherence to the principles of natural justice becomes necessary before taking such drastic action. The Court emphasized that the proper officer is required to provide a meaningful opportunity of hearing before proceeding with cancellation of registration. The Court held that

“The requirement of fair hearing cannot be reduced to an empty formality when the consequence is denial of the right to carry on business.”

Thus, the Court quashed the cancellation order and granted the petitioner one month’s time to either file a reply to the SCN or furnish all pending returns along with applicable interest and late fees. The Proper Officer was also directed to provide complete details of outstanding dues, if sought by the petitioner, and thereafter pass a fresh order in accordance with law.

To Read Full Judgment, Download PDF Given Below.