Facts of the Case

The petitioner, Amit Chandrakant Shah, was engaged in the business of trading in gold, silver, building materials and other goods. He was a registered dealer under the Goods and Services Tax law with effect from 4 August 2017 and held GSTIN No. 24ANLPS0681F1ZW.

On 1 October 2021, the Assistant Commissioner issued a show cause notice asking why the petitioner’s GST registration should not be cancelled. The petitioner submitted a reply on 7 October 2021. Thereafter, an email communication dated 14 October 2021 intimated that the suo motu cancellation proceedings had been dropped.

Subsequently, on 11 April 2022, another show cause notice was issued proposing cancellation of the petitioner’s GST registration. The petitioner replied on 15 April 2022. Despite this, the Assistant Commissioner passed an order dated 10 May 2022 cancelling the GST registration. The petitioner contended that the order was non-speaking and did not disclose proper reasons for cancellation.

The petitioner also made a representation dated 17 May 2022 against the cancellation order. As no effective relief followed, he approached the Gujarat High Court under Article 226 of the Constitution of India. The chronology and cancellation proceedings are recorded in the uploaded order.

Issues Involved

The principal issues before the Court were:

  1. Whether GST registration could validly be cancelled on the basis of a vague show cause notice lacking specific factual particulars, statutory provisions, rules and detailed grounds.
  2. Whether a cryptic and non-speaking cancellation order, containing no intelligible reasoning, could survive judicial scrutiny.
  3. Whether cancellation of registration despite the petitioner having submitted a reply amounted to non-application of mind and violation of the principles of natural justice.
  4. Whether technical glitches in the GST portal could justify the issuance of deficient notices or non-speaking cancellation orders.
  5. Whether the departmental authority was required to follow the binding directions previously issued in Aggarwal Dyeing and Printing Works vs State of Gujarat and Others.
  6. Whether the petitioner’s GST registration should be restored while preserving the authority’s liberty to initiate fresh proceedings in accordance with law.
  7. Whether repeated disregard of earlier judicial directions justified imposition of costs upon the department.

Petitioner’s Arguments

The petitioner argued that the impugned show cause notice did not contain the requisite details or material particulars necessary to enable an effective response. It did not properly refer to the relevant provisions, rules or factual basis for the proposed cancellation.

It was further submitted that the cancellation order dated 10 May 2022 was a non-speaking and cryptic order from which the actual reason for cancellation could not be deciphered.

The petitioner relied upon the Gujarat High Court’s decision in Aggarwal Dyeing and Printing Works vs State of Gujarat and Others, SCA No. 18860 of 2021 and allied matters, decided on 24 February 2022. It was argued that similar vague notices and non-speaking cancellation orders had already been disapproved and set aside by the Court.

The petitioner fairly acknowledged that, while quashing defective proceedings, the authority could be permitted to issue a fresh show cause notice containing specific reasons and full particulars and thereafter provide a reasonable opportunity of hearing before passing a speaking order.

Respondent’s Arguments

The State produced a communication dated 22 September 2022 concerning the petitioner’s GST registration. The departmental position was that a show cause notice had been issued, but due to technical glitches in the GST portal, the reply submitted by the taxpayer had not been received or reflected through the portal.

The authority stated that it intended to initiate fresh cancellation proceedings manually, issue a fresh show cause notice and provide an opportunity of hearing in physical/manual form.

The State also did not dispute the specific directions issued in Aggarwal Dyeing and Printing Works vs State of Gujarat and Others and referred to subsequent matters in which the principles of that judgment had been followed.

The learned Assistant Government Pleader further submitted that changes to the GST portal were not within the direct control of the State GST authorities and involved action at the Central/GSTN level. It was also urged that fresh manual proceedings could be completed within the statutory timeframe.

Court’s Findings

The Gujarat High Court found that the impugned cancellation order reflected complete non-application of mind.

A particularly serious contradiction was noticed by the Court: the cancellation order referred to a reply dated 22 April 2022 in response to the show cause notice dated 11 April 2022, yet simultaneously stated that no reply to the show cause notice had been submitted. The order then made the cancellation effective from 1 July 2017 without supplying any proper reasoning.

The Court held that the impugned order contained no reasons at all and was contrary to the principles already laid down in Aggarwal Dyeing and Printing Works.

The Court further observed that the show cause notice and cancellation action were subsequent to the earlier binding judgment delivered in February 2022. Despite clear judicial directions, the department continued to rely upon technical glitches in the GST portal.

The High Court rejected technical glitches as a sustainable justification for vague notices and cryptic orders. Where portal limitations prevented complete particulars from being incorporated electronically, the authority was expected to follow the Court’s earlier direction and issue detailed notices and orders in physical form.

The Court also expressed concern that procedural lapses of this nature unnecessarily generate writ litigation and consume substantial judicial time.

Court Order / Final Decision

The writ application was allowed solely on the ground of violation of the principles of natural justice.

The Gujarat High Court ordered that:

  1. The impugned show cause notice be quashed and set aside.
  2. Respondent No. 2 was granted liberty to issue a fresh show cause notice containing particular reasons and complete details.
  3. The petitioner must be given a reasonable opportunity of hearing.
  4. Any subsequent decision must be made through an appropriate speaking order on merits.
  5. The proceedings were required to be undertaken physically, in accordance with the directions laid down in the earlier decision.
  6. The petitioner’s GST Registration Number stood restored forthwith.
  7. The Court directed that guiding instructions be issued to all officers within one week from receipt of the order, and proof of compliance be forwarded to the Registrar (Judicial).
  8. The Court chose not to initiate contempt action against the concerned officer and did not personally saddle the officer with costs.
  9. However, because of the repetitive departmental action and failure to appropriately address the portal-related issue, the Court imposed costs of ₹25,000 on the department, payable to the petitioner.

Important Clarification

This judgment does not hold that the GST authorities are permanently barred from initiating cancellation proceedings against the petitioner.

The Court expressly preserved the authority’s liberty to issue a fresh show cause notice. However, such fresh proceedings must satisfy procedural fairness requirements: the notice must contain specific reasons, factual details and necessary particulars; the taxpayer must receive a reasonable opportunity of hearing; and the final determination must be a reasoned and speaking order.

The judgment also clarifies that technical limitations or glitches in the GST portal cannot dilute the principles of natural justice. If the portal cannot accommodate all necessary particulars, the authority must use physical/manual communication in accordance with the Court’s directions.

Further, where the authority proposes to rely upon an inspection report, spot-visit report or documentary evidence, that material should first be brought to the dealer’s notice so that an effective response can be made before an adverse order is passed.

Sections / Constitutional and Legal Provisions Involved

Article 226 of the Constitution of India — Writ jurisdiction of the High Court invoked to challenge the cancellation proceedings and order.

Goods and Services Tax Act, 2017 — Statutory framework governing the petitioner’s GST registration and cancellation proceedings. The Court specifically noted that the impugned notice failed to properly specify the relevant provisions, rules and requisite particulars; therefore, the judgment should not be presented as turning upon one clearly identified substantive GST cancellation section stated in the defective notice itself.

Principles of Natural Justice — Central basis of the decision, particularly the requirements of adequate notice, disclosure of specific grounds, reasonable opportunity of hearing and a reasoned speaking order.

Link to Download the Order https://mytaxexpert.co.in/uploads/1783319610_1056compressed.pdf

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