Goods & Services Tax (GST) in IndiaDEPARTMENT CANNOT PRESCRIBE A PROCEDURE BEYOND THE PROVISIONS OF LEGISLATION

The Delhi High Court in M/S Spinns International Through Its Proprietor v. PR Commissioner of Goods and Service Tax, North Delhi (West) And Anr. [W.P.(C) 1989/2023 decided on 15.02.2023] held that the show cause notice bereft of reasons is unsustainable and the department cannot impose conditions which are not prescribed in law.

FACTS

M/s. Spinns International (hereinafter referred to as the “Petitioner”) is registered under the Central Goods and Services Tax Act of 2017 (hereinafter referred to as the “CGST Act”) from 17.12.2021. The Petitioner applied for the amendments to the registration on 27.05.2022, which was accepted.

The Principal Commissioner of Goods and Services Tax, North Delhi (West) (hereinafter referred to as the “Respondent”) issued a Show Cause Notice (hereinafter referred to as the “SCN”) on 22.09.2022, proposing to cancel the registration of the Petitioner. The SCN merely stated that there was non-compliance of specified provisions of GST Act and Rules made there under. The Petitioner was unable to reply to the SCN as no reasons or details were stated by the Respondent.

The Petitioner’s registration was cancelled vide the Order dated 11.10.2022 (hereinafter referred to as the “Impugned Order”) on the ground that the Petitioner was neither present for personal hearing nor submitted reply to the SCN.

The Petitioner, aggrieved by the Impugned Order, filed an application seeking the revocation of the order of cancellation, which is pending. The Petitioner on 20.01.2023 received a letter from officers of Rohini Division stating that the registration was cancelled by Anti-Evasion Headquarter and a No Objection Certificate (hereinafter referred to as the “NOC”) would be required to proceed with the application of revocation of cancellation of registration. The Petitioner aggrieved by the cancellation of registration and flawed procedure, filed the present Petition.

ISSUES BEFORE THE HIGH COURT

1. Whether the SCN for cancellation of registration can be issued without stating reasons?
2. Whether the Petitioner is required to seek NOC from the Authority before moving an application of revocation of registration?

CONTENTIONS OF PARTIES

The Petitioner contended that the SCN issued by the Respondent is vague and does not specify any reason or allegation which the Petitioner could reply.  It was argued that there is no statutory provision that required a taxpayer to seek NOC from any authority for moving an application for revocation of cancellation of its registration.

DECISION AND FINDINGS

The Delhi High Court observed that the SCN issued by the Respondent to the Petitioner was bereft of reasons and without application of mind and hence, the present SCN cannot be sustained.  The Court held that there is no legal requirement that a taxpayer should get a NOC from any government authority before filing an application to revoke cancellation of its registration.

It was also observed that the procedure adopted by the Respondent, for cancellation of registration is flawed. Moreover, as the SCN is unsustainable, the Court also quashed and set aside the Impugned Order as it was violative of the principles of natural justice. The Court further quashed and set aside the SCN and the Impugned Order for cancellation of registration of the Petitioner.

AMLEGALS REMARKS

 The Delhi High Court has upheld that the stating of reasons and details is a sine qua non for any SCN. Moreover, the Authority cannot adopt any procedure which is not prescribed in the legislation. The Court also quashed and set aside the Impugned Order of cancellation of registration. Moreover, there is no provision in the CGST Act to get NOC from department and the Court therefore upheld the legislative intent of the GST laws.

– Team AMLEGALS assisted by Ms. Shabana Khatoon (Intern)

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