Case Note & Summary
The petitioner, Om Impex, a proprietary concern, had voluntarily applied for cancellation of its GST registration on 9 May 2023, which was accepted by the CGST authorities and made effective from 8 May 2023. After about 10 months, on 20 February 2024, the CGST authority revoked the cancellation without any prior notice or hearing, citing orders from an Appellate Authority/Higher Authority. On the same day, the application for voluntary cancellation was rejected without assigning any reasons. Subsequently, a show cause notice was issued on 26 February 2024 under Section 29(2)(e) of the CGST Act alleging fraud, and on 8 March 2024, registration was cancelled with retrospective effect from 27 June 2020, a date prior to the grant of registration on 28 June 2021. The petitioner challenged these orders. The court examined the decision-making process and found that the revocation of voluntary cancellation without a show cause notice or hearing violated principles of natural justice. The rejection of the voluntary cancellation application lacked reasons, indicating non-application of mind. The retrospective cancellation from a date before registration was granted was unsustainable. The court quashed the orders dated 20 February 2024, 8 March 2024, and 9 May 2024, restored the position as of 8 May 2023, and directed the respondents to issue a fresh show cause notice and pass a speaking order by 31 January 2025. The petitioner was restrained from utilizing ITC as of 8 May 2023 until that date.
Headnote
A) Constitutional Law - Principles of Natural Justice - Revocation of Voluntary Cancellation - Central Goods and Services Tax Act, 2017, Section 29 - The court held that revocation of voluntary cancellation of registration without issuing a show cause notice or granting a hearing is contrary to principles of natural justice. The order rejecting voluntary cancellation also lacked reasons, indicating non-application of mind (Paras 13-14). B) Goods and Services Tax - Retrospective Cancellation - Section 29(2) of Central Goods and Services Tax Act, 2017 - The court held that cancellation of registration with retrospective effect from a date prior to the grant of registration (27 June 2020) is unsustainable as registration was granted on 28 June 2021. No explanation was provided for such retrospective effect (Para 15). C) Goods and Services Tax - Show Cause Notice - Retrospective Effect - Central Goods and Services Tax Act, 2017, Section 29 - The court noted that the show cause notice dated 26 February 2024 did not specify that cancellation would be with retrospective effect, and the subsequent order cancelling registration retrospectively was therefore flawed (Paras 10, 15). D) Constitutional Law - Right to Hearing - Revocation of Cancellation - Central Goods and Services Tax Act, 2017 - The court held that before revoking a voluntary cancellation of registration, the authority must issue a show cause notice and provide an opportunity of hearing. Failure to do so vitiates the revocation order (Para 13).
Issue of Consideration
Whether the revocation of voluntary cancellation of GST registration without prior show cause notice and the subsequent cancellation of registration with retrospective effect are valid in law.
Final Decision
The court quashed and set aside the orders dated 20 February 2024, 8 March 2024, and 9 May 2024. Restored the position as of 8 May 2023 (date of acceptance of voluntary cancellation). Directed respondents to issue fresh show cause notice for revocation and pass speaking order by 31 January 2025. Restrained petitioner from utilizing ITC as of 8 May 2023 until 31 January 2025. Liberty to petitioner to challenge future orders.
Law Points
- Principles of natural justice
- Show cause notice requirement before revocation
- Retrospective cancellation of registration without authority
- Speaking order requirement
- Non-application of mind
