The Delhi High Court in a recent case held that the cancellation of Goods and Service Tax (GST) registration once restored for the same reason is not valid. M/S Samayshristi Enterprises, the petitioner challenged the order (the impugned order) passed by the respondent cancelling the petitioner’s GST registration with effect from 20.03.2021 (the date of registration). The impugned order was passed under a Show Cause Notice dated 18.09.2023 (SCN).
The respondent had issued the SCN proposing to cancel the petitioner’s GST registration observing that the assessee obtained registration using fraud, wilful misstatement or suppression of facts. The petitioner was directed to respond to the SCN within seven working days from the said date and to appear before the concerned officer on 25.09.2023.
The petitioner’s GST registration was also suspended with effect from the date of the SCN; that is, from 18.09.2023. The SCN did not specifically state the reason for proposing to cancel the petitioner’s GST registration. Although it was alleged that the GST registration was obtained using fraud, wilful misstatement, or suppression of facts, the SCN did not provide any clue as to the alleged fraud committed by the petitioner or the wilful misstatement made by it.
There is no indication as to the facts which are alleged to have been suppressed by the petitioner. It is trite law that a show cause notice is to respond to the allegation which forms the basis of proposing an adverse action. The impugned order merely states that it is about the SCN. The petitioner had applied to seek revocation of cancellation of its GST registration in terms of the circular dated 31.03.2023. The petitioner’s application was accepted and the petitioner’s GST registration was restored by an order dated 16.09.2023.
A division bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed that once the petitioner’s GST registration was restored – which was cancelled on an allegation that it was obtained by fraud, misstatement or suppression of facts – it is not open for the respondent to again cancel the petitioner’s GST registration for the same reason unless it is premised on the ground that had occurred after the petitioner’s GST registration has been cancelled on 30.09.2021. While allowing the petition, the Court set aside the impugned order and directed to restore the petitioner’s GST registration.