Facts of the Case

The petitioner, M/s Chauhan Construction Co., challenged the cancellation of its GST registration vide order dated 05.04.2021, which was issued pursuant to a Show Cause Notice (SCN) dated 26.03.2021.

The SCN alleged that the petitioner had issued invoices without actual supply of goods or services, resulting in wrongful availment or utilization of input tax credit. However, the SCN lacked specific details and did not provide any intelligible reasons. Further, it failed to mention the date, time, or venue for personal hearing.

Subsequent applications filed by the petitioner seeking revocation of cancellation were rejected through similarly vague notices and orders, without proper reasoning or opportunity of hearing. The appellate authority also rejected the appeal on procedural grounds.

Issues Involved

  1. Whether the GST registration cancellation order passed without proper reasoning is valid in law.
  2. Whether absence of specific allegations and particulars in the Show Cause Notice violates principles of natural justice.
  3. Whether failure to provide an opportunity of personal hearing renders the proceedings invalid.
  4. Whether retrospective cancellation without prior notice is sustainable.

Petitioner’s Arguments

  • The SCN was vague and did not disclose any specific allegations or material particulars.
  • No opportunity of personal hearing was granted as no date, time, or venue was specified.
  • Orders rejecting revocation applications were passed mechanically without assigning reasons.
  • Retrospective cancellation from the date of registration was illegal as it was not proposed in the SCN.
  • The petitioner could not access the GST portal due to suspension of registration. 

Respondent’s Arguments

  • The petitioner failed to respond to the Show Cause Notices within the stipulated time.
  • The petitioner did not appear in proceedings initiated through the GST portal.
  • The rejection of revocation applications and appeal was justified on procedural non-compliance. 

Court’s Findings / Order

The Hon’ble Delhi High Court held:

  • The SCN was bereft of material particulars and did not provide intelligible reasons for cancellation.
  • No effective opportunity of hearing was granted as notices did not specify date, time, or venue.
  • The cancellation order lacked reasoning and was passed in violation of principles of natural justice.
  • Retrospective cancellation was invalid since it was not proposed in the SCN.

Final Order:

  • The impugned cancellation order and SCNs were set aside.
  • The respondents were directed to restore GST registration forthwith.
  • The petitioner was directed to file pending returns within 30 days and pay applicable dues.

Important Clarification by Court

  • The order will not preclude authorities from initiating fresh proceedings in accordance with law for any statutory violations or recovery of dues.

Sections Involved

  • Section 107 of the Central Goods and Services Tax Act, 2017 (Appeal provisions)
  • Relevant provisions relating to cancellation of GST registration under CGST Act, 2017
  • Principles of Natural Justice (Audi Alteram Partem)
  • CGST Rules, 2017 & DGST Rules, 2017

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB06092024CW125062024_114008.pdf

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