The court set aside the cancellation order and directed for immediate restoration of the petitioner’s GST registration.
In a ground-breaking decision pertaining to cancellation of GST registration, the Delhi High Court recently ruled in favour of M/s. S K Enterprises in their case against the Principal Commissioner of GST [Case No. W.P.(C) 16452/2023 and CM APPL. 66279/2023]. The court held that the cancellation of GST registration without clearly specifying the allegations is not justifiable. The order of cancellation was set aside, and the GST authority was directed to restore the petitioner’s GST registration.
Background of the Case:
The petitioner challenged the order dated 19.07.2023, which cancelled their GST registration with retroactive effect from 23.05.2022. The cancellation was initiated based on a show-cause notice (SCN) dated 05.07.2023, citing Section 29(2)(e) – registration obtained by means of fraud, wilful misstatement, or suppression of facts.
Show-Cause Notice Deficiencies:
The SCN lacked specificity, failing to outline the specific reasons for proposing the cancellation. While alleging fraud, wilful misstatement, or suppression of facts, it did not provide details on the alleged fraud, misstatement, or suppressed facts. This lack of clarity did not meet the standard required for a show-cause notice.
Suspension and Lack of Reasoning:
The petitioner’s GST registration was suspended from the date of the SCN, i.e., 05.07.2023, with no clear reasoning provided. Additionally, the impugned order lacked substance, merely referencing the SCN without offering any additional reasoning for the cancellation.
Retrospective Cancellation:
Notably, the petitioner’s registration was cancelled retrospectively from 23.05.2023. Neither the SCN nor the impugned order provided any rationale for such retrospective action.
Court Decision:
The court emphasized that a show-cause notice (SCN) must clearly articulate the allegations, enabling the affected party to respond meaningfully. Given the deficiencies in the SCN and the lack of reasoning in the impugned order, the court set aside both and directed the immediate restoration of the petitioner’s GST registration.
Conclusion:
This landmark judgment by the Delhi High Court highlights the importance of clarity in show-cause notices and reasoned orders, particularly in matters of GST registration cancellation. The decision serves as a precedent, ensuring that allegations are clearly specified before adverse actions are taken, fostering a fair and transparent legal process in GST matters.
To Access the CBIC Instruction No.5/2023 for GST Officers CLICK HERE
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