Facts of the Case

The petitioner challenged an order dated 03.08.2023 cancelling its GST registration, issued pursuant to a show-cause notice dated 12.06.2023 that alleged (i) registration obtained by fraud/wilful misstatement under Section 29(2)(e), (ii) issuing invoices without actual supply under Rule 21(b), (iii) availing ITC in violation of Section 16, and (iv) violation of Rule 86B — but did not set out any particulars supporting these allegations beyond citing the bare provisions. The petitioner had filed a detailed reply denying the vague allegations, which the final order did not meaningfully address, instead relying on unspecified e-way bills said not to have passed through toll gates without disclosing which bills or vehicle numbers were involved.

Issues Involved

  1. Whether a show-cause notice and cancellation order that cite statutory provisions (fraud, fake invoicing, wrongful ITC) without disclosing the underlying facts/particulars can sustain cancellation of GST registration.

Petitioner's Arguments

  • The petitioner argued that neither the show-cause notice nor the final order disclosed the nature of the alleged fraud, wilful misstatement or suppression, or particulars of the e-way bills/vehicles said to be non-compliant, making it impossible to meaningfully respond.

Respondent's Arguments

  • The Government Pleader defended the cancellation, submitting that the petitioner had committed fraud in obtaining registration and issued invoices without actual movement of goods.

Court Order / Findings

  • Examining the show-cause notice, the Court found that beyond citing the provisions and their gist, no particulars of the alleged fraud, wilful misstatement or suppression were furnished, and the final order was equally cryptic, referring to unspecified e-way bills without disclosing details of the vehicles or bills concerned.
  • The Court held that non-furnishing of particulars deprived the finding of any credence, and set aside both the show-cause notice and the cancellation order, directing restoration of the petitioner's registration forthwith.
  • The second respondent was given liberty to issue a fresh show-cause notice with requisite particulars, enabling the petitioner to respond, before conducting a fresh enquiry and passing an appropriate order.

Important Clarification

  • A GST registration cancellation founded on serious allegations such as fraud, fake invoicing, or wrongful availment of ITC must be supported by concrete particulars (specific transactions, invoice or e-way bill numbers, vehicle details) in both the show-cause notice and the final order; merely reciting the statutory provisions and their gist, without disclosing the underlying facts, renders the action unsustainable and the registration is liable to be restored, though the department retains liberty to proceed afresh with a properly particularised notice.
  • This principle protects assessees from being called upon to answer generic, unfalsifiable allegations, while preserving the department's substantive power to act once it discloses the specific case against the taxpayer.

Sections Involved

  • Section 29(2)(e) of the CGST Act, 2017 - permits cancellation where registration was obtained by fraud, wilful misstatement or suppression of facts.
  • Rule 21(b), (e) and (g) of the CGST Rules, 2017 - additional grounds of cancellation including issuing invoices without supply, wrongful ITC availment, and violation of Rule 86B.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; the show-cause notice and cancellation order were set aside and registration ordered restored, with liberty to the department to issue a fresh, particularised notice.

Case Details

High Court for the State of Andhra Pradesh, Writ Petition No.22623 of 2023; Coram: Hon'ble Sri Justice U. Durga Prasad Rao and Hon'ble Sri Justice A.V. Ravindra Babu; decided on 20 September 2023.

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