Facts of the Case

The petitioner, FADA Trading Private Limited, challenged an order dated 26.10.2021 passed by the Appellate Authority under GST, whereby its appeal was dismissed on the ground of limitation.

The dispute originated from:

  • A show cause notice dated 02.12.2019 issued to the petitioner.
  • A subsequent order dated 11.12.2019 cancelling GST registration.

The petitioner contended that:

  • The show cause notice lacked material particulars.
  • No proper opportunity of hearing was provided.
  • Neither the notice nor the cancellation order was received due to internal disputes among directors.

Issues Involved

  1. Whether the appellate authority was justified in dismissing the appeal on the ground of limitation despite the Supreme Court’s COVID-19 limitation extension orders.
  2. Whether the show cause notice and cancellation of GST registration were legally sustainable in the absence of material particulars and proper service.
  3. Whether violation of principles of natural justice vitiates GST cancellation proceedings. 

Petitioner’s Arguments

  • The dismissal of appeal on limitation was erroneous in light of the Supreme Court’s orders extending limitation periods in Suo Motu W.P.(C) No. 3/2020.
  • The show cause notice was vague and defective, as it did not specify date and time for personal hearing.
  • The petitioner never received the notice or cancellation order, thus denying an opportunity to respond.
  • There was no outstanding tax demand, making cancellation unjustified.

Respondent’s Arguments

  • The respondent acknowledged that the Supreme Court’s limitation extension orders would apply in view of the CBIC circular dated 20.07.2021.

Court’s Findings / Judgment

The Delhi High Court held:

  • The order dismissing the appeal on limitation was unsustainable due to applicability of Supreme Court’s COVID-19 limitation extension.
  • The show cause notice was fundamentally defective, lacking essential details such as hearing date and time.
  • The principles of natural justice were violated, as no proper opportunity of hearing was granted.
  • The Court also noted that no demand was outstanding against the petitioner.

Final Order:

  • The impugned appellate order dated 26.10.2021 was set aside.
  • The GST cancellation order dated 11.12.2019 was also quashed.
  • The petitioner’s GST registration was directed to be restored within 10 days.

Important Clarifications by the Court

  • A defective show cause notice cannot sustain cancellation proceedings.
  • Even where remand is possible, courts may directly grant relief if foundational defects exist.
  • Limitation laws must be applied in light of Supreme Court’s extraordinary COVID-19 directions.
  • Authorities must ensure proper service and opportunity of hearing before adverse action.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1286-DB/RAS07042022CW12122022_173333.pdf

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