06.07.2024 : Notice of show cause issued in incorrect form; entire proceedings held without jurisdiction and invalid : Kerala High Court

The Kerala High Court in the case of Kunhalavi N. v. State Tax Officer vide WP (C) NO. 17333 OF 2024 dated 10.06.2024, The Supreme Court set aside the cancellation of the petitioner’s GST registration on the grounds of procedural irregularities in issuance of show cause notice in an incorrect form and in a vague manner. The show cause notice was issued in Form GST-REG-31 instead of Form GST-REG-17 prescribed as per Rule 22 of the CGST/SGST Rules. Form GST-REG-31 is meant for suspension proceedings and not for cancellation. The notice was found to be vague and lacking in specific details required for cancellation proceedings.

The judgment underlines the need to respect legal procedures in judicial proceedings.

Facts of the case:- The applicant, a registered dealer, has not filed returns from December 2021. On 07.06.2022, the first respondent issued a show cause notice (Ext. P2) to the applicant for non-filing of returns, using Form GST-REG-31. Subsequently. On 13.07.2022, the first respondent issued an order (Ext. P3) cancelling the registration of the applicant for non-filing of returns for six consecutive months and non-response to the show cause notice.

The petitioner filed an appeal under Section 107 of the CGST/KSGST Acts against the cancellation order. However, the appeal was delayed for 361 days and the petitioner was apprehensive that it would be dismissed.

Subsequently, the petitioner filed the present application challenging the cancellation of its GST registration under the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act (CGST/KSGST Acts). The cancellation was ordered on the grounds of non-filing of returns and non-response to a notice of demand.

Argued that:- The show cause notice was issued in Form GST-REG-31 instead of Form GST-REG-17 prescribed under Rule 22 of the CGST/SGST Rules. Form GST-REG-31 is meant for suspension proceedings and not for cancellation proceedings. The notice was found to be vague and did not contain the specific details required for cancellation proceedings.

The Court reiterated that legal procedures must be strictly followed in accordance with the laws. Deviations from the prescribed procedures render the actions invalid. It cited previous judgments in which similar procedural defects led to the setting aside of annulment orders.

The Court held that since the notice of default had not been issued in the proper form, the entire proceeding, including the annulment order, was deemed without jurisdiction and invalid.

The court set aside the cancellation order due to procedural defects. The applicant is required to file all outstanding returns together with taxes, late fees, interest and penalties within two weeks of the reinstatement of his registration.

To read the full judgment 2024 Taxo.online 1254