2025 (5) TMI 1891 - HC - GST

Retrospective cancellation of the GST Registration of the Petitioner - non-compliance of any specified provisions without citing any specific section or rule of the GST Act - Petitioner s failure to file GST returns during a period of medical exigency of its Director - HELD THAT - In the opinion of this Court the alleged violation as stated in the SCN is completely incomprehensible as it generally alleges non-compliance of unspecified provisions of the GST Act and Rules. There is no specific Section or Rule mentioned. In such a case it is impossible for any assessee to figure out as to which provision has been violated and as to what reply ought to be given. The GST official issuing such notice ought to be careful to mention the specific provision of the GST Act and Rule of which violation is alleged. It is only then that the Assessee can give a proper reply to such a show cause notice. Hence the SCN is in fact completely untenable in law as there is no clarity as to the aspect on which the assessee has to show cause. Under these circumstances and in view of the medical exigency faced by the Director it is held that the cancellation of GST Registration of the Petitioner shall only be with effect from 10th March 2023. The Petitioner has no objection to the same as the Petitioner is no longer carrying on the business - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the retrospective cancellation of the GST Registration of the Petitioner from 10th May 2018 was legally valid.

- Whether the Show Cause Notice (SCN) issued dated 10th March 2023 was legally tenable, particularly given its vague reference to "non-compliance of any specified provisions" without citing any specific section or rule of the GST Act or Rules.

- Whether the Petitioner's failure to file GST returns during a period of medical exigency of its Director justified cancellation of registration retrospectively.

- The appropriate effective date for cancellation of the GST Registration in light of the facts and submissions.

- The procedural propriety and standards required in issuance of Show Cause Notices under the GST regime.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Retrospective Cancellation of GST Registration

Relevant legal framework and precedents: Under the GST Act and Rules, cancellation of registration is a serious administrative action that requires adherence to due process, including issuance of a show cause notice specifying grounds for cancellation. Retrospective cancellation is generally disfavored unless justified by clear statutory provisions and facts.

Court's interpretation and reasoning: The Court noted that the impugned order cancelled the GST Registration retrospectively from 10th May 2018, which was the date of initial registration. The Court found this to be arbitrary and unjustified, especially since the Petitioner had filed GST returns subsequently, albeit with some delay.

Key evidence and findings: The Petitioner had obtained GST Registration on 9th May 2018 and faced difficulties in filing returns due to the Director's ill health starting September 2022. The Petitioner filed the returns belatedly up to March 2023. No evidence was presented that the Petitioner was carrying on business after March 2023.

Application of law to facts: The Court held that retrospective cancellation from the date of registration without clear grounds was untenable. The medical exigency and subsequent filing of returns mitigated the alleged non-compliance.

Treatment of competing arguments: The Respondent-Department argued that cancellation is usually effective from the date of issuance of the SCN and justified retrospective cancellation due to non-filing of returns. The Court rejected the retrospective effect from 2018, limiting cancellation to the date of SCN issuance.

Conclusion: The Court held that cancellation shall be effective only from 10th March 2023, the date of the SCN.

Issue 2: Legal Tenability of the Show Cause Notice

Relevant legal framework and precedents: Principles of natural justice and statutory requirements mandate that a show cause notice must specify the exact provisions of law alleged to be violated, enabling the recipient to make an effective and meaningful reply.

Court's interpretation and reasoning: The SCN dated 10th March 2023 cited "Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed" without mentioning any specific section or rule. The Court found this vague and incomprehensible, rendering the notice legally defective.

Key evidence and findings: The SCN failed to identify any particular statutory provision violated by the Petitioner. The Petitioner was thus unable to discern the exact nature of the alleged non-compliance.

Application of law to facts: The Court emphasized that issuing such ambiguous notices violates the principles of natural justice and statutory mandates, as the assessee cannot effectively respond without clarity.

Treatment of competing arguments: The Respondent did not justify the vagueness of the SCN. The Court criticized the GST officials for lack of care in drafting the notice.

Conclusion: The SCN was held to be untenable in law for failure to specify the provisions allegedly violated.

Issue 3: Effect of Medical Exigency and Filing of GST Returns

Relevant legal framework and precedents: While compliance with GST return filing is mandatory, courts have recognized that exceptional circumstances such as medical emergencies may justify delay or non-compliance, subject to subsequent rectification.

Court's interpretation and reasoning: The Court accepted the Petitioner's submission that the Director's ill health caused the delay in filing returns. The returns were subsequently filed up to March 2023, indicating bona fide efforts to comply.

Key evidence and findings: The Petitioner provided a detailed statement of GST returns filed late from June 2022 to March 2023. No evidence indicated willful or deliberate evasion.

Application of law to facts: The Court considered the medical exigency a mitigating factor and held that cancellation should not be backdated beyond the date of SCN issuance.

Treatment of competing arguments: The Respondent's reliance on non-filing was tempered by the Petitioner's explanation and subsequent compliance.

Conclusion: The Court limited cancellation to 10th March 2023, acknowledging the medical exigency and belated filing.

Issue 4: Procedural Standards in Issuance of Show Cause Notices

Relevant legal framework and precedents: Administrative authorities are required to issue clear, specific, and reasoned show cause notices to uphold principles of natural justice and fair play.

Court's interpretation and reasoning: The Court expressed serious concern over the issuance of ambiguous SCNs lacking specific allegations, which undermine the fairness of the process.

Key evidence and findings: The SCN's vague language was highlighted as a procedural deficiency.

Application of law to facts: The Court directed that all GST Commissionerates and concerned officials be instructed to avoid issuing such ambiguous notices in future.

Treatment of competing arguments: No justification was provided by the Respondent for the vague SCN.

Conclusion: The Court mandated dissemination of this order to GST authorities to ensure compliance with procedural standards.

3. SIGNIFICANT HOLDINGS

"The alleged violation, as stated in the SCN is completely incomprehensible as it generally alleges non-compliance of unspecified provisions of the GST Act and Rules. There is no specific Section or Rule mentioned. In such a case, it is impossible for any assessee to figure out as to which provision has been violated and as to what reply ought to be given."

"The SCN is in fact completely untenable in law as there is no clarity as to the aspect on which the assessee has to show cause."

"Under these circumstances and in view of the medical exigency faced by the Director, it is held that the cancellation of GST Registration of the Petitioner shall only be with effect from 10th March, 2023."

"The GST Department Officials ought to be careful not to issue such ambiguous show cause notices in future."

"Let a copy of this order be circulated to all the GST Commissionerates and the concerned Superintendents of the various wards of the DGST department so that it can be ensured that such show cause notices, that do not mention any specific provisions are not issued in future."

Core principles established include the necessity for specificity in show cause notices under GST law to uphold natural justice, the inadmissibility of retrospective cancellation without clear grounds, and recognition of genuine medical exigencies as mitigating factors in compliance delays.

Final determinations were that the GST Registration cancellation was valid only from the date of the SCN (10th March 2023), the SCN was legally defective for vagueness, and procedural safeguards must be observed by GST authorities in issuing notices.