Facts of the Case

The petitioner, Golden Key Construction, challenged the order cancelling its GST registration. The GST authorities cancelled the registration on the ground that the petitioner had failed to file GST returns for the prescribed continuous period. The petitioner also failed to seek revocation of cancellation within the prescribed period under Section 30 of the CGST Act and did not file the statutory appeal within time.

During the proceedings before the High Court, it was brought to notice that the show cause notice issued before cancellation was defective, as it was issued in a combined format referring to GST REG-17 and GST REG-31, contrary to the statutory procedure prescribed under the CGST Rules.

 

Issues Involved

  1. Whether GST registration can be cancelled based on a defective show cause notice issued in an incorrect statutory form.
  2. Whether a combined notice under GST REG-17 and GST REG-31 is legally sustainable.
  3. Whether violation of the prescribed statutory procedure vitiates the cancellation proceedings under Section 29 of the CGST Act.

 

Petitioner's Arguments

  • The petitioner contended that the cancellation proceedings were initiated through an invalid and legally defective show cause notice.
  • The notice was issued by combining Form GST REG-17, meant for cancellation proceedings, with Form GST REG-31, which is prescribed only for suspension of registration.
  • Such a procedure is not contemplated under the CGST Rules.
  • The show cause notice merely stated that returns had not been filed continuously for six months without furnishing adequate particulars or reasons, thereby violating the principles of natural justice.
  • The petitioner relied upon earlier judgments of the Kerala High Court holding that cancellation proceedings initiated through an incorrect statutory form are without jurisdiction.

 

Respondent's Arguments

  • The Government Pleader submitted that the petitioner admittedly failed to file GST returns for the prescribed period.
  • Since the petitioner defaulted in statutory compliance, the cancellation of registration was justified.
  • It was further argued that the petitioner neither applied for revocation within the limitation prescribed under Section 30 nor filed the statutory appeal within the prescribed time.
  • Therefore, according to the department, no interference was warranted.

 

Court Order / Findings

The Kerala High Court allowed the writ petition and quashed the order cancelling the GST registration.

The Court held that:

  • The CGST Rules prescribe Form GST REG-17 for initiating cancellation proceedings, whereas Form GST REG-31 is specifically meant for suspension of registration under Rule 21A.
  • There is no provision permitting issuance of a combined notice under GST REG-17 and GST REG-31.
  • Where a statute prescribes that an act must be performed in a particular manner, it must be performed only in that manner.
  • The show cause notice was also vague and failed to disclose sufficient particulars regarding the alleged default.
  • Consequently, the initiation of cancellation proceedings itself was without jurisdiction.
  • The Court relied upon its earlier decision in W.P.(C) No.28783 of 2022 and also referred to the Gujarat High Court decisions in Aggarwal Dyeing and Printing and Singh Traders, which held that vague and defective show cause notices cannot sustain cancellation proceedings.
  • Accordingly, the cancellation order was quashed.

However, the Court clarified that restoration of GST registration would not absolve the petitioner from statutory liabilities. The petitioner was directed to file all pending GST returns and discharge tax, interest, late fee, penalty, and other applicable liabilities within two weeks from restoration of registration.

 

Important Clarification

The judgment reiterates that:

  • GST registration cannot be cancelled through proceedings initiated by an invalid statutory form.
  • Form GST REG-17 alone can be used for initiating cancellation proceedings under Rule 21.
  • Form GST REG-31 is exclusively meant for suspension proceedings under Rule 21A.
  • A vague show cause notice without proper particulars violates the principles of natural justice.
  • Even where cancellation is quashed, the taxpayer remains liable to file pending returns and pay applicable tax, interest, penalty, and late fee.
  • Procedural safeguards under the GST law are mandatory and cannot be bypassed by the department.

Relevant Sections Involved:

  • Section 29 of the Central Goods and Services Tax Act, 2017 – Cancellation of Registration
  • Section 30 of the Central Goods and Services Tax Act, 2017 – Revocation of Cancellation of Registration
  • Rule 21 of the CGST Rules, 2017
  • Rule 21A of the CGST Rules, 2017
  • Form GST REG-17
  • Form GST REG-31

Link to Download the Order https://www.mytaxexpert.co.in/uploads/1782895143_71.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.