"CGST Registration Cancellation Quashed Due to Lack of Natural Justice, Retrospective Cancellation Invalid" "Bombay High Court sets aside CGST registration cancellation citing procedural flaws and violation of natural justice."

Case Note & Summary

This judgment addresses the flawed decision-making process of CGST Authorities in revoking a voluntary cancellation of registration and imposing retrospective cancellation without following principles of natural justice. The Court found that the revocation and subsequent cancellation lacked due process, specifically the issuance of a show cause notice and proper reasoning, and quashed the relevant orders.

Petition Filed Under Article 226A petition was filed challenging two orders passed by CGST Authorities on 20 February 2024 and 9 May 2024, which revoked the voluntary cancellation of GST registration and canceled it retrospectively from 27 June 2020.

Timeline of Events & Key DatesCGST registration was issued on 28 June 2021. The petitioner voluntarily applied for cancellation on 9 May 2023, which was accepted, and registration was canceled from 8 May 2023. Subsequently, in February 2024, this cancellation was revoked without a hearing, followed by another cancellation order dated 8 March 2024, with retrospective effect from 27 June 2020.

Show Cause NoticeOn 26 February 2024, the CGST Authorities issued a show cause notice accusing the petitioner of obtaining registration through fraud. The petitioner failed to respond within the specified period.

CGST’s Reasoning & Cancellation OrdersThe cancellation was based on State GST Authorities' input regarding bogus Input Tax Credit (ITC). However, the CGST failed to provide a hearing or show cause notice before revoking the earlier voluntary cancellation.

Violation of Natural JusticeThe Court found that the CGST’s actions violated natural justice. The petitioner was not given a show cause notice before the revocation, and the Form GST REG-05 rejecting the voluntary cancellation lacked any reasons, indicating non-application of mind.

Retrospective Cancellation UnjustifiedThe Court questioned how the registration could be canceled retrospectively from 27 June 2020, despite being granted on 28 June 2021, pointing out a lack of explanation from the authorities.

Documentary DeficienciesKey documents supporting the revocation were not shared with the petitioner, further contravening the principles of natural justice.

Final Court OrdersThe Court quashed the CGST orders dated 20 February 2024, 8 March 2024, and 9 May 2024, and restored the petitioner's registration cancellation as of 8 May 2023. The respondents were given liberty to initiate fresh proceedings with a proper show cause notice.

Constitution of India – Article 226:Allows High Courts to issue orders to government authorities for enforcement of fundamental rights or other legal rights.

Central Goods and Services Tax (CGST) Act, 2017 – Section 29(2)(e):Allows authorities to cancel GST registration if it was obtained fraudulently, through misstatement or suppression of facts.

The judgment focuses on the violation of the principles of natural justice by the CGST authorities. The lack of a show cause notice before the revocation of voluntary cancellation and insufficient reasoning in rejecting the cancellation application led the court to quash the impugned orders. Additionally, the retrospective cancellation without justification was deemed unjustified. The case highlights the requirement for a fair decision-making process in administrative actions.