Facts of the Case

The present writ petition was filed challenging the order dated 04.05.2022 whereby the GST registration of the petitioner, M/s Balaji Enterprises, was cancelled by the Superintendent, Ward-66. The cancellation order was based on a show cause notice dated 31.03.2022.

The show cause notice merely stated that the registration was liable to be cancelled on the ground that it may have been obtained by fraud, willful misstatement, or suppression of facts. However, no specific allegations or material facts were disclosed in the notice.

The petitioner filed a reply dated 07.04.2022 stating that all GST returns were duly filed, liabilities discharged, and compliance requirements fulfilled. The petitioner also clarified ownership and usage of the business premises and requested verification.

Subsequently, the registration was cancelled on the basis that an inquiry was pending by DGGI, Chennai regarding supply of alleged spurious goods, and that the premises were found sealed during physical verification.

Issues Involved

  1. Whether a show cause notice without specific allegations is valid under law.
  2. Whether cancellation of GST registration can be sustained when the order travels beyond the scope of the show cause notice.
  3. Whether non-compliance with procedural requirements under GST law violates principles of natural justice.
  4. Whether failure to upload verification report under Rule 25 of CGST Rules vitiates the proceedings.

Petitioner’s Arguments

  • The show cause notice was vague and did not disclose any material facts or specific allegations.
  • The petitioner had duly complied with all GST provisions, including filing of returns and payment of liabilities.
  • The impugned order introduced new grounds (pending inquiry and sealing of premises) which were not mentioned in the show cause notice.
  • No proper opportunity of hearing was provided, and the verification report was not shared or uploaded.
  • The action violated principles of natural justice and statutory requirements.

Respondent’s Arguments

  • The GST registration was cancelled under Section 29(2) of the CGST Act, 2017.
  • An inquiry was pending by DGGI, Chennai concerning supply of spurious goods.
  • Physical verification of the premises revealed that it was sealed, justifying cancellation.
  • The petitioner was given an opportunity to respond to the show cause notice.

Court’s Findings

  • The show cause notice was completely vague and lacked any specific reasons or factual foundation for proposing cancellation.
  • The burden was improperly placed on the petitioner to disprove allegations without any disclosure of facts.
  • The impugned order relied on grounds (pending inquiry and physical verification findings) which were not mentioned in the show cause notice, making the order unsustainable.
  • There was a clear violation of Rule 25 of the CGST Rules, as the verification report was neither uploaded nor shared.
  • The Court held that the proceedings violated principles of natural justice.

Court Order / Final Decision

  • The writ petition was allowed.
  • The impugned cancellation order dated 04.05.2022 was set aside.
  • The respondents were directed to restore the GST registration of the petitioner.
  • Liberty was granted to the department to issue a fresh show cause notice and proceed in accordance with law.

Important Clarification by the Court

  • Authorities must provide clear, specific, and reasoned show cause notices.
  • Orders cannot travel beyond the scope of the show cause notice.
  • Procedural safeguards under GST law, including Rule 25 compliance, are mandatory.
  • Restoration of registration does not bar fresh lawful proceedings by authorities.

Sections / Provisions Involved

  • Section 29(2), CGST Act, 2017 – Cancellation of Registration
  • Section 29(3) & 29(5), CGST Act, 2017
  • Section 45 & 47, CGST Act, 2017
  • Rule 25, CGST Rules, 2017
  • Principles of Natural Justice

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3765-DB/RAS07092022CW103152022_171014.pdf

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