High Court Sets Aside Retrospective GST Cancellation for Violation of Natural Justice

The petitioner, which is a proprietorship firm, had its GST registration cancelled at its own behest through a June 2, 2022, application. This was granted through an order dated June 22, 2022, making the cancellation effective from May 31, 2022. Nearly three years later, the department attempted to modify this order of cancellation on the reasoning that the assessee had indulged in fraudulent practices and on fraud being played in obtaining the cancellation. The revisional power issued an order of July 22, 2024, which revoked by way of retrospective cancellation the assessee’s registration under GST from August 12, 2017, the date of original registration.

The assessee, in representation through counsel, objected to this revisional order on the grounds that there was a gross breach of principles of natural justice and fair play since no show-cause notice or notice of revisional proceedings had been issued to them. The department asserted that the assessee had given erroneous addresses and that emails were dispatched to the Petitioner’s registration address. However, the assessee pointed out that the department had served the initial cancellation order of June 22, 2022, to the assessee’s present address in Ahmedabad, and therefore, the department had the correct address but chose to attempt service at an outdated one.

Issue Raised: Whether a revisional order issued by the department, retrospectively revoking GST registration, is jurisprudentially viable when issued in the absence of effective service of the SCN on the assessee, and hence contrary to principles of natural justice.

HC’s Decision: The High Court quashed the revisional order and remitted the case. The Hon’ble High Court held that there was no effective service of the show-cause notice issued on July 1, 2024. The impugned revisional order dated July 22, 2024, was thus held to have been passed without giving effect to the notice to the assessee and was quashed on this “short ground” of a failure of natural justice. The Court allowed the department to go ahead with its July 1, 2024, show-cause notice and ordered that the same be served on the counsel for the assessee, Mr. Harnesha, in order to prevent any future controversy about service.

The assessee’s counsel agreed to receive the notice and file a reply within four weeks. The Court explicitly stated that all contentions on the merits or demerits of the case were left open for the revisional authority to decide. With the revision order being set aside, the Court noted that the earlier order of cancellation ordered on June 22, 2024, was revived and that the same be marked on the department’s portal at the earliest. The Rule was made absolute in these words without costs.

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