Facts of the Case

Sh. Atul Bansal's GST registration was cancelled by order dated 06.06.2022, pursuant to a show cause notice dated 17.05.2022 that cited only 'non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed,' without identifying which provision was violated. The petitioner could not appear for the personal hearing fixed on 24.05.2022, and the cancellation order itself merely recorded that the taxpayer neither attended the hearing nor responded to the query, again without stating any substantive reason. The petitioner's subsequent appeal against cancellation was rejected on 31.01.2023 as time-barred, which order was impugned in this writ petition.

Issues Involved

  1. Whether a show cause notice and consequent cancellation order that fail to specify any reason or provision allegedly violated can be sustained.
  2. Whether the petitioner's earlier own application for cancellation of registration had any bearing on the department's later cancellation for non-compliance.

Petitioner's Arguments

  • Neither the show cause notice dated 17.05.2022 nor the cancellation order dated 06.06.2022 provided any clue as to the reason for the proposed or actual cancellation of registration.

Respondent's Arguments

  • Counsel for the respondents accepted notice and did not dispute the contents of the impugned orders as placed before the Court.

Court Order / Findings

  • The purpose of a show cause notice is to enable the noticee to respond to specific allegations forming the basis of proposed adverse action; the notice here failed to provide any clue as to why cancellation was proposed, merely stating a belief of violation without referring to any provision.
  • A show cause notice and a cancellation order under the GST Act that do not disclose any reason or specific statutory provision allegedly contravened fail their basic legal purpose and cannot sustain cancellation of registration, regardless of the taxpayer's non-appearance at the hearing.
  • The Court also noted the cancellation order was not traceable to the petitioner's own earlier application for cancellation, since that application had itself been rejected for want of documents.
  • The show cause notice, the cancellation order dated 06.06.2022, and the appellate order dated 31.01.2023 were all set aside, with liberty to the respondents to issue a fresh, properly particularised notice, and to the petitioner to apply afresh for cancellation if he so chooses.

Important Clarification

  • A GST show cause notice must specify the particular provision alleged to be violated and the factual basis for the allegation; a notice or order that merely recites a generic non-compliance clause, without more, cannot support cancellation of registration and will be quashed even where the assessee did not respond or attend the hearing.

Sections Involved

  • Section 29, CGST Act, 2017 - cancellation of registration.
  • Section 30, CGST Act, 2017 - application for cancellation of registration by the registered person.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the show cause notice and both orders set aside, disposed of with liberty to the department to proceed afresh.

Case Details

Court: High Court of Delhi at New Delhi
Case No.: W.P.(C) 4252/2023
Coram: Justice Vibhu Bakhru and Justice Amit Mahajan
Date of Order: 06.04.2023

Link to Download the Order

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