M/s. Bhati Enterprise through its Prop. Sukhvindersinh Ajitsinh Bhati Vs Union of India (Gujarat High Court)
Introduction: In a recent judgment, the Gujarat High Court, in the case of M/s. Bhati Enterprise through its Prop. Sukhvindersinh Ajitsinh Bhati Vs Union of India, has quashed a show-cause notice for the cancellation of registration. The petitioner, represented by Mr. Shubham Jhajharia, challenged the notice on grounds of violating the principles of natural justice, citing vagueness and lack of specificity. The court, echoing its earlier decisions, ruled in favor of the petitioner, emphasizing the need for detailed and specific show-cause notices.
Background: The petitioner, M/s. Bhati Enterprise, faced a show-cause notice from the Union of India, seeking the cancellation of its registration. The notice alleged that the registration had been obtained through fraudulent means, willful misstatement, or suppression of facts. The petitioner contended that the notice was vague and did not provide sufficient details to enable them to respond adequately.
Legal Arguments: Mr. Shubham Jhajharia, representing the petitioner, argued that the show-cause notice violated the principles of natural justice. He emphasized the vagueness of the notice, citing a precedent set by the court in the case of Sarvoday Impex vs. Union of India on 07.06.2023. Mr. C.B. Gupta, representing the respondent Union of India, did not dispute the legal proposition laid down in the Sarvoday Impex case.
Court’s Analysis: The Gujarat High Court, referring to its previous decisions, examined the contentions raised by both parties. The court specifically cited the case of Aggrawal Dyeing and Printing Works vs. State of Gujarat and others, highlighting the importance of incorporating specific details in show-cause notices. The court expressed dissatisfaction with vague notices, considering them a mere formality and an insufficient basis for a fair response.
Precedents Cited: The judgment extensively referred to the case of Sarvoday Impex, where the court had quashed a similar show-cause notice. The court reiterated the need for detailed reasons and particulars in such notices. It also cited a case where technical glitches were used as an explanation for vague notices, deeming it an invalid excuse.
Court’s Verdict: The Gujarat High Court, finding merit in the petitioner’s contentions and following its earlier decisions, quashed the show-cause notice dated 10.12.2022. The court granted liberty to the respondent authorities to issue a fresh notice with specific reasons and details. The petitioner was directed to restore the registration forthwith, and the court clarified that it had not delved into the merits of the case.
Conclusion: The judgment by the Gujarat High Court reaffirms the importance of adhering to principles of natural justice in administrative proceedings. The court’s emphasis on detailed and specific show-cause notices ensures that individuals have a fair opportunity to respond to allegations. This decision serves as a reminder to authorities to provide clear and comprehensive notices, fostering a more transparent and just legal process.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard Mr. Shubham Jhajharia, learned advocate appearing for the petitioner and Mr. C.B. Gupta, learned advocate appearing for the respondent Union of India.
2. Challenge in this petition is to the show-cause notice for cancellation of registration. As per the show-cause notice, it is the case of the department that the registration has been obtained by means of fraud, wilfull misstatement or suppression of facts.
3. Mr. Jhajharia, learned advocate for the petitioner would submit that the show-cause notice violates the principles of natural justice inasmuch as the show-cause notice is vague and cryptic and does not state the exact case against the petitioner firm so as to enable the petitioner to file a reply. He would rely on a decision of this court in the case of Sarvoday Impex vs. Union of India rendered on 07.06.2023 in Special Civil Application No. 903 of 2023 and submit that the facts of the present case are akin to the facts of the case in Sarvoday Impex (supra) and therefore this petition may also be disposed of on the same lines.
4. Mr. C.B. Gupta, learned advocate appearing for the respondent Union of India would also not dispute the proposition of law laid down by this court in the above referred decision and the fact that the facts of the present petition shall be governed by the said decision.
5. This court in the case of Sarvoday Impex vs. Union of India rendered a decision on 07.06.2023 in Special Civil Application No. 903 of 2023 in an identical matter relying on a decision of the coordinate bench of this court in the case of Aggrawal Dyeing and Printing Works vs. State of Gujarat And Others reported in Special Civil Application No. 18860 of 2021 decided on 24.02.2022. The relevant paras of the said decision read as under:
“[10] From the aforesaid show-cause notice, it is clear that the respondents have not provided in details to the petitioner, how the petitioner has committed fraud, wilful misstatement or suppression of facts; while obtaining the registration, no documents were supplied to the petitioner alongwith the said show-cause notice.
[11] This Court has considered in the similar type of case of Aggrawal Dyeing (supra) and observed in para 13.1 and 16 as under:-
“13.1 To say the least, the respondent authority i.e. the Assistant/Deputy Commissioner, State tax Officer ought to have atleast incorporated specific details to the contents of the show cause. Any prudent person would fail to respond to such show cause notice bereft of details thereby making the mechanism of issuing show cause notice a mere formality and an eye wash. 16. When we inquired with the learned AGP appearing for the respondents as to why such vague show cause notices and vague final orders, bereft of any material particulars therein are being passed, the reply on behalf of the respondents was quite baffling. The learned AGP submitted that on account of technical glitches in the portal, the department is finding it very difficult to upload the show cause notice as well as the final order of cancellation of registration containing all the necessary details and information therein. According to the learned AGP, it is in such circumstances that the show cause notices and impugned orders without any details are being forwarded to the dealers. This hardly can be a valid explanation for the purpose of issuing such vague show cause notices and vague final orders cancelling the registration.”
[12] In Special Civil Application No.11262 of 2020, the Division Bench of this Court has considered the similar type of show-cause notice and observed in paras 2, 3, 4, 5 & 6 as under:-
“2. Mr. Meena is the signatory of the show cause notice as also the impugned order of cancellation both of which are assailed in the writ petition. We have directed for the appearance of Mr. Meena upon perusal of the show cause notice dated 20.07.2020
(Annexure-H to the petition). Perusal of the same indicates that to such show cause notice no response can be given by any assessee. The show cause notice is as vague as possible and does not refer to any particular facts much less point out so as to enable the noticee to give his reply. The contents of the show cause notice dated 20.07.2020 are reproduced below:
“Form GST REG-17
[See Rule 22(1)]
ReferenceNumber: ZA240 7200794641
Date :20/07/2020
To INDRESH KUMAR
3, SOMNATH SHOPPING CENTER,
SMRUTI MANDIR CANAL ROAD GHODASAR,
AHMEDABAD, Ahmedabad, Gujarat, 380050
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 In case, Registration has been obtained by means of fraud, willful misstatement or suppression of facts. You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice. 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.
Place : Gujarat
Date : 20/07/2020
Prem Raj Meena Superintendent
Ghatak 18(Ahmedabad):
Range-5 : Division‑
2: Gujarat”
3 According to learned counsel for the petitioner Mr. Dave, without fixing a date for hearing and without waiting for any reply to be filed by the petitioner, the cancellation order was passed on 30.07.2020 whereby registration of the petitioners with GST department was cancelled. Although the cancellation order refers to a reply submitted by the petitioner and also about personal hearing, but according to Mr. Dave neither he had submitted any reply nor afforded any opportunity of hearing. This fact is not disputed by Mr.Bhatt.
4 Mr. Bhatt, learned counsel for the respondent No.2 has sought to explain that some discrepancy occurred on account of some technical glitch in the system (on-line portal). The reply filed by the respondent is on record.
5 We are not entering into the merits of the impugned order as we are convinced that the show cause notice itself cannot be sustained for the reasons already recorded above. Therefore, the cancellation of registration resulting from the said show-cause notice also cannot be sustained.
6 For the reasons recorded above, the writ petition succeeds and is allowed. The impugned show cause notice dated 20.07.2020 (Annexure-H) and the impugned cancellation order dated 30.07.2020 (Annexure-I) are hereby quashed. With respect to the other consequence that may follow, the parties would be at liberty to take appropriate steps. Mr. Bhatt made request that the Court may grant liberty to proceed afresh. We are not inclined to pass such order, but we only observe that if law permits, the respondent No.2 may proceed afresh in accordance with law.”
[13] From the aforesaid order, it reveals that, in the said case as similar type of contentions were raised on behalf of the respondent. However, this Court has quashed and set aside the similar type of show-cause notice issued to the concerned petitioner for cancellation of registration. We are of the view that the present matter is squarely covered by the aforesaid order passed by this Court, therefore, the impugned show-cause notice deserves to be quashed and set aside on the similar grounds.
[14] In view of the aforesaid facts and reasons, the present petition is allowed. The impugned show-cause notice dated 06.0 1.2023, being without reasons, is cryptic and deserves to be quashed and set aside, and is hereby quashed and set aside. However, liberty is granted to the respondent authorities to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the petitioner and to pass appropriate order in accordance with law. The concerned respondent is hereby directed to restore the registration of the petitioner forthwith.
[15] It is needless to mention that it shall be open for the petitioner to respond to such notice by filing objection/reply with necessary documents, if relied
[16] It is clarified that this Court has not examined the merits of the case of the parties.”
6. In view of the above, since the present petition is squarely covered by the aforesaid order, the impugned notice being cryptic and without reasons deserves to be quashed and set aside.
7. In view of the above, the present petition is allowed. The impugned show-cause notice dated 10.12.2022 is hereby quashed and set aside. However, liberty is granted to the respondent authorities to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the petitioner and to pass appropriate order in accordance with law. The concerned respondent is hereby directed to restore the registration of the petitioner forthwith.
8. Needless to mention that it shall be open for the petitioner to respond to such notice by filing objection/reply with necessary documents, if relied upon. It is clarified that this Court has not examined the merits of the case of the parties.
