HC Quashes Order Cancelling GST Registration Beyond Notice Scope

Ramji Enterprises & Ors. Vs Commissioner of State Tax & Ors. (Bombay High Court)

The Bombay High Court has issued a significant judgment in the case of Ramji Enterprises & Ors. vs. Commissioner of State Tax & Ors., where it has quashed the cancellation of GST (Goods and Services Tax) registration. This article provides a summary of the court’s decision and its implications.

Summary of the Case

Ramji Enterprises and others filed a petition under Article 226 of the Constitution of India, seeking the quashing of two orders: one dated June 24, 2021, suspending their GST registration, and the other dated July 12, 2021, canceling their GST registration.

The key contention raised by the petitioners was that the cancellation of their GST registration was based on grounds that were completely different from the ones mentioned in the show cause notice issued earlier.

The petitioners also highlighted that they had filed an appeal before the Deputy Commissioners of State Tax (Appellate Authority) on May 30, 2022, but no progress had been made in the appeal process for almost a year. Additionally, they mentioned their intention to withdraw the appeal.

Court’s Decision

The Bombay High Court carefully examined the show cause notice, the impugned orders, and the arguments presented by both sides. The court found merit in the petitioners’ contention that the cancellation of their GST registration was based on grounds not mentioned in the show cause notice.

The court emphasized that such a discrepancy would prejudice the petitioners, as they could not have anticipated the reasons provided in the impugned order.

Consequently, the court held that the principles of natural justice required the quashing of the impugned order. The court also granted liberty to the respondents to issue a fresh show cause notice to the petitioners, as permitted by law. The respondents were instructed to follow due process and pass an appropriate order in accordance with the law after hearing the petitioners.

Conclusion

The Bombay High Court’s decision in the case of Ramji Enterprises & Ors. vs. Commissioner of State Tax & Ors. is a significant development in the realm of GST law. It underscores the importance of adherence to natural justice principles and the need for consistency between show cause notices and subsequent orders.

This judgment serves as a reminder that government authorities must act within the bounds of the law and provide clear and consistent communication to taxpayers when taking actions such as the cancellation of GST registration. The court’s decision to quash the order and grant an opportunity for a fresh show cause notice demonstrates its commitment to upholding fairness and justice in tax matters.

Taxpayers and legal practitioners should take note of this judgment, as it has implications for similar cases where the cancellation of GST registration is challenged on grounds that were not initially communicated in the show cause notice. It reinforces the importance of procedural fairness and the right of taxpayers to know the exact reasons for adverse actions taken by tax authorities.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

This petition under Article 226 of the Constitution of India has been filed for following reliefs : –

“(a) Issue an appropriate writ and order to quash and set aside the impugned orders of suspension of GST Registration dated 24^th June 2021 and Cancellation of GST Registration dated 12^th July 2021 and marked as an Exhibit-C & E and duly attached to the present writ petition.”

2. Mr. Walve, learned counsel for the petitioners has drawn our attention to the show cause notice dated 24^th June 2021 and reply to the show cause notice dated 29^th June 2021. He has also drawn our attention to the impugned order cancelling the registration of the petitioners dated 12^th July 2021. The contention as urged by Mr. Walve is that the cancellation is not on the ground on which the show cause notice was issued.

3. Mr. Walve would also submit that the petitioners had filed an appeal before the Deputy Commissioners of State Tax (Appellate Authority) on 30^th May 2022. However, nothing has so far happened except receipt of notice intimating the date of personal hearing on 15^th June 2022 which is almost one year back. It is also contended by Mr. Walve that he has been instructed to withdraw this appeal.

4. On the other hand, Ms. Jyoti Chavan, learned AGP, who support the impugned order, submits that in the above circumstances, the petition does not deserve any indulgence of this Court and needs to be rejected.

5. We have heard learned counsel for the parties. We have also perused the impugned order and also the record. There is much substance in the contentions as urged on behalf of the petitioners inasmuch as the impugned order cancelling the registration of the petitioners appears to be on a ground completely outside of scope of show cause notice issued to the petitioners. This would certainly cause prejudice to the petitioners as the petitioners never anticipated such reason as set out in the impugned order.

6. We are thus of the clear opinion that certainly a prejudice was caused to the petitioners considering the principles of natural justice. In the aforesaid circumstances, we are of the opinion that the impugned order is required to be quashed and set aside with liberty to the respondents to issue a fresh show cause notice to the petitioners as permissible in law and after hearing the petitioners, an appropriate order in accordance with law be passed. Ordered accordingly.

7. At this stage, Ms. Jyoti Chavan, learned AGP states that a notice would be issued to the petitioners within three weeks from today. If that be so, the petitioners shall respond to the said show cause notice. The Designated officer after hearing the petitioners shall pass an appropriate order in accordance with law within a period of three weeks from the date of hearing being granted to the petitioners by the designated officer.