2025 (7) TMI 206 - HC - GST

Maintainability of petition - availability of alternative remedy - Cancellation of the Petitioner s registration under the Maharashtra Goods and Services Tax Act 2017 - Vague and bereft SCN - Violation of principles of natural justice - HELD THAT - The show cause notice refers to Section 29(2)(e) and states that registration was obtained by means of fraud willful misstatement or suppression of facts. Although a time limit was granted to file a reply and the Petitioner was informed that if he failed to appear for a personal hearing on the appointed date and time the case would be decided ex parte the show cause notice at Exh-B does not specify this appointed date or time. Merely quoting a Section and alleging that registration has been obtained through fraud willful misstatement or suppression of facts in a show cause notice is never enough. The noticee must be given an idea of what the alleged fraud misstatement or suppression of facts was. Only then will the noticee be able to understand the allegations against them and respond effectively. Regarding the alternative remedy the objections are typically entertained and the parties are directed to pursue the statutory remedies available. However it is well established that in cases of a gross breach of principles of natural justice petitioners should not be relegated to the alternative remedies. The concern is not primarily with the final decision but with the fairness of the decision-making process itself. Any process that is not underpinned by natural justice renders the final decision susceptible to challenge. This stands as a notable exception to the rule of not entertaining petitions where effective alternative remedies are available. The impugned order is set aside - petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the impugned order for cancellation of the Petitioner's registration under the Maharashtra Goods and Services Tax Act, 2017 ("MGST Act") dated 07 July 2023 is sustainable in law;

(b) Whether the show cause notice dated 12 June 2023 issued under Section 29(2)(e) of the MGST Act, alleging that registration was obtained by fraud, wilful misstatement or suppression of facts, meets the requirements of natural justice by adequately informing the Petitioner of the precise allegations;

(c) Whether the absence of particulars or an attachment specifying the alleged fraud or misstatement in the show cause notice renders the cancellation order invalid;

(d) Whether the Petitioner's failure to produce the alleged attachment to the show cause notice or the Respondent's contention that it was suppressed affects the validity of the proceedings;

(e) Whether the delay in filing the Petition and the availability of alternative statutory remedies such as revocation or appeal bar the Court from entertaining the Petition;

(f) The scope of judicial intervention in cases involving gross violation of principles of natural justice despite the existence of alternative remedies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity of the impugned cancellation order and adequacy of the show cause notice under Section 29(2)(e) of the MGST Act

The relevant legal framework is Section 29(2)(e) of the MGST Act which permits cancellation of registration if it is obtained by fraud, wilful misstatement, or suppression of facts. Rule 22(1) and sub-rule (2A) of rule 21A prescribe procedural safeguards including issuance of a show cause notice before cancellation.

The Court emphasized the fundamental principle of natural justice that the noticee must be made aware of the precise allegations against them to enable an effective response. The mere citation of a statutory provision and a general allegation of fraud or misstatement without particulars is insufficient.

The show cause notice dated 12 June 2023 was examined in detail. It was found to be "entirely vague and bereft of any particulars," merely stating that registration was liable to be cancelled under Section 29(2)(e) due to fraud, wilful misstatement, or suppression of facts, without specifying the nature or details of such allegations. No appointed date or time for personal hearing was mentioned in the notice.

The Respondent attempted to supplement the notice with an attachment detailing the allegations. However, the Petitioner demonstrated through screenshots of the official portal that no such attachment was served or available, and the Respondent conceded possible technical glitches preventing its display.

The Court held that the Petitioner's inability to access the attachment or particulars meant he was deprived of a fair opportunity to understand and respond to the charges. This constituted a breach of the principles of natural justice, rendering the cancellation order unsustainable.

Issue (c) & (d): Effect of absence or suppression of the attachment containing particulars

The Court noted the Respondent's contention that the Petitioner suppressed the attachment was unconvincing given the Petitioner's evidence showing the absence of such attachment on the portal. The Court underscored the Petitioner's duty to place the complete show cause notice on record, but equally stressed the Respondent's obligation to ensure proper service of all relevant documents.

The absence of particulars in the served notice and failure to provide the attachment meant the Petitioner was effectively denied a meaningful hearing. The Court found this procedural defect fatal to the impugned order.

Issue (e): Delay in filing the Petition and availability of alternative remedies

The Respondent argued that the Petition was filed belatedly (the impugned order dated 07 July 2023, Petition filed on 22 April 2025) without explanation and that the Petitioner had alternative remedies such as seeking revocation or filing an appeal. Therefore, the Petition should not be entertained.

The Court distinguished between delay and laches, noting that mere passage of time does not bar relief unless the delay causes prejudice or crystallization of rights in the opposite party. Here, the Petitioner suffered due to the delay, and no such prejudice was shown.

Regarding alternative remedies, the Court recognized the general principle that statutory remedies should be exhausted before approaching the Court. However, it carved out a well-established exception where there is a gross violation of natural justice. In such cases, the Court will entertain petitions directly to ensure fairness in the decision-making process itself, not merely the correctness of the final order.

Issue (f): Judicial approach to breach of natural justice despite alternative remedies

The Court referred to a recent analogous decision where a similarly vague show cause notice was quashed on grounds of patent vagueness and breach of natural justice. The Respondent in that case consented to quashing but sought liberty to issue a fresh notice.

The Court reiterated that its interference was strictly limited to procedural fairness and natural justice. It expressly left open all merits and rival contentions relating to cancellation under the MGST Act.

3. SIGNIFICANT HOLDINGS

"Merely quoting a Section and alleging that registration has been obtained through fraud, willful misstatement, or suppression of facts in a show cause notice is never enough. The noticee must be given an idea of what the alleged fraud, misstatement, or suppression of facts was. Only then will the noticee be able to understand the allegations against them and respond effectively."

"Any action based upon such a vague show cause notice cannot be sustained because the same would be a product of a violation of principles of natural justice."

"Though this Petition could have been filed earlier, it is not as if the Petitioner has gained anything by filing this Petition marginally late. In fact, it is the Petitioner who has suffered during this period."

"In cases of a gross breach of principles of natural justice, petitioners should not be relegated to the alternative remedies. Our concern is not primarily with the final decision but with the fairness of the decision-making process itself. Any process that is not underpinned by natural justice renders the final decision susceptible to challenge."

"We allow this Petition and set aside the impugned order dated 07 July 2023. However, since we have interfered with the order only on the ground of breach of the principles of natural justice, we clarify that the Respondents would have the liberty to issue a fresh show cause notice to the Petitioner and dispose it of in accordance with law, following this time the principles of natural justice and fair play."

The Court's final determination was to quash the cancellation order dated 07 July 2023 on the sole ground of violation of natural justice due to the vagueness of the show cause notice and absence of particulars. The Court permitted the Respondent to issue a fresh show cause notice with full particulars and to proceed thereafter in accordance with law and fair procedure. The Court declined to examine or rule on the merits of the cancellation itself, leaving all substantive contentions open for fresh consideration.