Indirect Tax Judgement No. 2

06.01.2024 : Today, the author was browsing through the database, and an underlying judgement caught my attention, which may be relevant for many of us, especially in connection with issues of GST registration cancellation. The author is summarising the juice of judgement with my comments for the readers. The same can be applied to any analogue’s scenarios.

Sub: GST Registration cancellation – Violation of Principles of Natural Justice

Facts:

• RTP was registered under the provisions of GST Law;
• RTP was issued SCN for the cancellation of GST Registration
• SCN did not provide any particulars as to the alleged fraud committed by the RTP;
• SCN also didn’t provide a specific reason for proposing cancellation of the RTP’s GST registration.
• SCN also does not provide any particulars regarding the alleged fraud committed by the RTP.
• SCN also does not provide any clue as to the wilful misstatement made or the facts allegedly suppressed
• Thus, RTP, being aggrieved, filed the writ petition before the jurisdictional HC to seek reprieve;

High Court Comments:

• A plain reading of the impugned SCN indicates that it is bereft of any specific reason for proposing cancellation of the petitioner’s GST registration. It does not provide any particulars as to the alleged fraud committed by the petitioner. It also provides no clue as to the wilful misstatement made or the facts allegedly suppressed.
• It is settled law that the Show Cause Notice must clearly set out the reasons for proposing an adverse action. This is to enable the Noticee to meet the said allegations. Clearly, the impugned SCN was incapable of eliciting any meaningful response in the absence of any specific allegation
• There is merit in the petitioner’s contention that the impugned SCN is liable to be set aside
• In the event that the respondents propose to take any action for cancellation of the petitioner’s GST registration, it would be open for the respondents to do so, albeit in accordance with the law. The respondents would be required to issue a proper Show Cause Notice and take an appropriate decision after affording the petitioner a reasonable opportunity to be heard

High Court Held:

• The respondents are also not precluded from taking any steps for the recovery of any tax, penalty or interest that may be due from the petitioner
• The suspension of the petitioner’s GST Registration will stand lifted forthwith, and the respondents are directed to take immediate steps for the same

My Comments

1. Nowadays, registration applications are also rejected for frivolous reasons. Can we derive support from the judgement? In my opinion, yes
2. Please examine the contents of SCN under lenses to shortlist lacunae in the issue of SCN besides Time Limits and Jurisdictions;
3. If GST registration is cancelled without citing any reasons, RTP can explore the option of filing writ petitions before jurisdictional HC

Judgement Citation: Neelkanth Metal v. Union of India [2024] 158 taxmann.com 142 (Delhi)

Please read the judgement before you reach any conclusions.