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2025 (5) TMI 1117 - HC - GSTCnacellation of registration - lack of jurisdiction - SCN was devoid of any reasons and the order passed by the original authority cancelling the registration was devoid of reasons - Violation of principles of natural justice - HELD THAT - The scope of consideration of the grounds on which the appellant had challenged the impugned orders is limited in a proceedings under Article 226 of the Constitution though this court can at times examine the correctness of the appellate authority s order as well as the original authority s order by considering the merits of the matter since the dealers have invoked the extraordinary jurisdiction of this court under Article 226 of the Constitution on account of non-availability of statutory remedy before the tribunal because the tribunal is yet to be constituted - in the instant case on perusal of the show cause notice dated 15.12.2021 the same is bereft of any particulars. In any event since the show cause notice did not contain any reasons it is a notice which is nonest in the eye of law as the appellant did not have adequate opportunity to rebut the allegations against it since the allegations were not set out in the show cause notice - This inherent defect goes to the root of the matter which cannot be cured or rectified at a subsequent stage or in the appellate stage. The initiation of the proceedings by issuance of the show cause notice is flawed - all subsequent proceedings have to fail on the ground of error of jurisdiction as well as on the ground of violation of principle of natural justice. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter include:
2. ISSUE-WISE DETAILED ANALYSIS Jurisdiction of Original and Appellate Authorities The Court noted that the appellant challenged the cancellation order on the ground of lack of jurisdiction. The Court observed that the writ petition was initially filed but withdrawn to pursue the statutory appeal. The Court recognized that the tribunal under the WBGST Act was not yet constituted, thus limiting statutory remedies and enabling the High Court to exercise extraordinary jurisdiction under Article 226. However, the Court did not find any express or implicit lack of jurisdiction on the part of the authorities. The issue was more about procedural irregularities and violation of natural justice rather than jurisdictional competence. Validity and Sufficiency of the Show Cause Notice The show cause notice dated 15.12.2021 was scrutinized for compliance with legal standards. The Court found the notice to be "bereft of any particulars" and lacking in reasons. It emphasized that such a notice is "nonest in the eye of law" as it failed to inform the appellant adequately of the allegations to enable a meaningful response. The appellant had submitted a reply denying the allegations and requested an opportunity to submit additional submissions. Despite this, the registration was cancelled on 22.12.2021 without any reference to the appellant's representation. The Court held that this fundamental defect "goes to the root of the matter" and cannot be cured at later stages, including appellate proceedings. Reliance on Inspection Report and Compliance with Rule 25 of CGST Rules The appellate authority relied on an inspection report dated 14.12.2021, which was one day prior to the issuance of the show cause notice. The Court highlighted that a copy of this report was never furnished to the appellant. Rule 25 of the CGST Rules mandates that such reports and all connected materials be uploaded within 15 days, which was not complied with. The Court found this reliance on an undisclosed report to be a violation of the appellant's right to know the case against it and to prepare a defense. This constituted a serious breach of the principles of natural justice. Violation of Principles of Natural Justice The Court emphasized that the appellant was not afforded an adequate opportunity to put forth its contentions. The lack of particulars in the show cause notice, non-consideration of the appellant's reply, and non-furnishing of the inspection report cumulatively resulted in a "serious violation of principle of natural justice." The Court rejected the State's argument regarding an interim order passed during the pendency of the writ petition, clarifying that any interim order merges into the final order and the appellant is entitled to challenge all grounds in the final adjudication. Scope of Judicial Review under Article 226 The Court acknowledged that the writ jurisdiction under Article 226 is limited and ordinarily does not involve reappraisal of facts or merits. However, given the absence of a statutory tribunal, the Court held that it could examine the correctness of the orders to the extent necessary to prevent miscarriage of justice. This included scrutiny of procedural compliance and adherence to natural justice. Retrospective Cancellation and Grounds for Appeal The Court noted that the appellant would be entitled to raise all grounds, including the contention that retrospective cancellation of registration was impermissible. This was to be considered afresh by the original authority upon remand. The Court directed that the appellant be given a full opportunity to canvas both factual and legal arguments in this regard. Application of Law to Facts and Treatment of Competing Arguments The Court carefully weighed the appellant's submissions regarding procedural lapses and the State's reliance on interim orders and procedural compliance. It found the appellant's arguments regarding lack of particulars in the show cause notice and non-furnishing of the inspection report compelling. The State's contention that the appellant did not challenge an interim order was held to be immaterial in view of the final order being challenged. The Court applied the established legal principle that a show cause notice must contain clear and specific allegations to satisfy the requirements of natural justice. The failure to provide the appellant with the inspection report and to consider its reply was fatal to the validity of the cancellation. Key Findings and Evidence The primary evidence scrutinized was the show cause notice dated 15.12.2021, the inspection report dated 14.12.2021, and the appellant's replies dated 21.12.2021 and subsequent representations. The Court found that the show cause notice lacked particulars and reasons, the inspection report was not furnished, and the appellant's replies were ignored. These facts led to the conclusion that the cancellation order was vitiated by jurisdictional error and violation of natural justice. 3. SIGNIFICANT HOLDINGS The Court held:
The Court established the core principle that a show cause notice must disclose clear and specific reasons and particulars to satisfy the requirements of natural justice and that failure to do so invalidates the entire proceedings, including subsequent appellate orders. The final determination was to allow the intra court appeal, set aside the impugned orders including the flawed show cause notice, and remit the matter to the original authority with directions to issue a fresh show cause notice incorporating the inspection report, afford reasonable time for submission of written explanations and documents, provide a personal hearing, and pass fresh orders on merits and in accordance with law. The appellant was permitted to raise all grounds, including retrospective cancellation, and directed to cooperate without seeking adjournments.
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