GST Registration Cancellation Set Aside Due to Vague Show Cause Notice

Sing Traders Vs State of Gujarat (Gujarat High Court)

In this case, the writ applicant approached the High Court under Article 226 of the Constitution of India seeking quashing of a show cause notice dated 14.02.2022 and the consequential order dated 22.02.2022 passed by the State Tax Officer, Ahmedabad, which cancelled the applicant’s GST registration. The applicant also sought restoration of registration and interim relief against the operation of the cancellation order.

The applicant was registered under the Gujarat Goods and Services Tax Act, 2017. A show cause notice was issued under Section 29 of the CGST Act, 2017 read with Rule 22(1) of the CGST Rules, 2017, stating that the registration was liable to be cancelled on the ground that the dealer was found suspicious and no documents were found at the place of business. The notice required the applicant to submit a reply within seven working days and to appear for a personal hearing on 21.02.2022, failing which the matter would be decided ex parte. The notice also stated that the registration stood suspended with effect from 14.02.2022.

Subsequently, on 22.02.2022, the State Tax Officer passed an ex parte order cancelling the GST registration with effect from 11.01.2022. The order recorded that no reply had been submitted and that the applicant had not appeared for the hearing. It also included a tabular determination of tax, interest, penalty, and other dues, all of which were shown as zero.

The High Court examined the contents of both the show cause notice and the cancellation order. It observed that the show cause notice was vague and lacked material particulars, as it merely stated that the dealer was suspicious and that no documents were found at the place of business, without providing any supporting details or evidence. The Court further noted that the cancellation order was also vague and non-speaking, as it did not contain adequate reasoning or justification for the action taken.

On this basis, the Court held that both the show cause notice and the cancellation order were unsustainable in law. Accordingly, the Court quashed and set aside the impugned order dated 22.02.2022. The matter was remitted to the concerned authority for fresh adjudication (de novo proceedings) in accordance with law.

As a consequence of quashing the cancellation order, the Court directed that the GST registration of the applicant shall stand revived. With these observations and directions, the writ application was disposed of.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:

“(a) To issue a writ in the nature of certiorari and or any other appropriate writs, order or direction for calling of records of proceedings initiated pursuant to show-cause notice dated 14.02.2022 and after perusing the same be pleased to quash and set aside show cause notice dated 14.02.2022 and order dated 22.02.2022 passed thereon by State Tax Officer, Ghatak 13, Ahmedabad, and be further pleased to direct restoration of registration bearing number 24CDCPR3552B1ZX;

(b) To pass an ex-parte ad interim order staying the operation, execution and implementation of the order dated 22.02.2022 bearing reference no. ZA240222104600G passed by State Tax Officer, Ghatak 13, Ahmedabad, pending the hearing and final disposal of present petition; and

(c) Grant such further and other interim reliefs, as this Hon’ble Court may deem fit and proper in the present nature and circumstances of the case.”

2. The brief facts, as emerges from the record, are summarized as under:

2.1 The writ applicant is registered under the Gujarat Goods and Service Tax Act, 2017 (for short ‘the Act, 2017). A show cause notice dated 14.02.2022 was issued by the State Tax Officer, Ghatak – 13, Ahmedabad, in Form GST REG-17/31 under Section 29 of the CGST Act, 2017 read with Rule 22(1) of the CGST Rules, 2017. The reason specified in the said show cause notice reads as under:

“Show Cause Notice for Cancellation of Registration

Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:

1. DEALER FOUND SUSPICIOUS. NO DOCUMENTS FOUND AT THE PLACE OF BUSINESS.

You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.

You are hereby directed to appear before the undersigned on 21/02/2022 at 11:00.

If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.

Please note that your registration stands suspended with effect from 14/02/2022.”

2.2 Pursuant to the show cause notice, the writ applicant was required to submit his reply within a period of seven days, failing which, the case was to be decided ex-parte. On 22.02.2022, the State Tax Officer, Ghatak-13, Ahmedabad, passed ex-parte order of cancellation of registration. The contents of the said order reads thus:

“Order for Cancellation of Registration

This has reference to your reply dated 21/02/2022 in response to the notice to show cause dated 14/02/2022

Whereas no reply to notice to show cause has been submitted; Whereas on the day fixed for hearing you did not appear,

The effective date of cancellation of your registration is 11/01/2022

Determination of amount payable pursuant to cancellation:

Accordingly, the amount payable by you and the computation and basis thereof is as follows:

The amounts determined as being payable above are without prejudice to any amount that may be found to be payable you on submission of final return furnished by you.

You are required to pay the following amounts on or before 04/03/2022 failing which the amount will be recovered in accordance with the provisions of the Act and rules made thereunder.”

3. We have heard Ms. Manvi Damle, the learned counsel appearing for the writ applicant and Mr. Utkarsh Sharma, the learned AGP appearing for the respondents.

4. On bare perusal of the the contents of the show cause notice as well as the impugned order, we find that the said show cause notice is absolutely vague, bereft of any material particulars and the impugned order is also vague and a non­speaking order. We quash and set aside the impugned order dated 22.02.2022 and remit the matter to the respondent No.2 for denovo proceedings in accordance with law. In view of the fact that we have quashed the order of cancellation of GST registration, the GST registration stands revived.

5. With the aforesaid, this writ application stands disposed of.