Department cannot issue SCN merely alleging false declaration, without pointing out the specific fact of suppression by the taxpayer: Delhi HC

Noting that the show cause notice (SCN) sent to the applicant/taxable person did not state any intelligible reason justifying the cancellation of his GST registration, the Delhi High Court cancelled the said SCN.

The High Court held that the SCN issued to the petitioner merely referred to the provisions of Section 29(2)(e) of the CGST Act, 2017 which empowers the proper officer to cancel the GST registration of the taxpayer if it is obtained by fraud, wilful misrepresentation or suppression of facts, without stating any specific fact of allegation.

The division bench of Justice Vibhu Bakhru And Justice Sachin Datta observed that “The contested SCN did not indicate any alleged fraud or mention any statement that was a wilful misrepresentation. Nor did it set out any facts that were allegedly concealed by the applicant.” . (Paragraph 10)

Facts of the case

The applicant was called upon to show cause as to why his GST registration should not be cancelled. In response, the applicant filed an application for revocation of the cancellation order. Pursuant to the said application, the respondent/Department issued a cessation notice calling upon the applicant to show cause as to why his application for revocation of the cancellation order should not be dismissed. Since the applicant failed to respond to the cessation notice and failed to appear before the concerned competent officer on the appointed date and time, the applicant’s application for revocation of the cancellation order was dismissed. The applicant, accordingly, approached the High Court.

High Court Observation

First, the Court noted that the annulment order was made in violation of the principles of natural justice.

Furthermore, the Court found that the SCN which was adopted following the applicant’s application to revoke the annulment order, clearly sets out two reasons for dismissing the said application and for maintaining the annulment order.

The first reason for the dismissal of the revocation application was that the applicant’s registered office address was vague/incomplete and could not be located, the Court added.

On the other hand, the court observed that the second reason for dismissing the revocation application was that the petitioner had shown huge turnover over a period of two months and the entire GST was paid by availing Input Tax Credit (ITC).

When the competent officer questioned the authenticity of the said transaction and asked the applicant to provide details thereof, the applicant’s counsel limited the application to seeking an opportunity to respond to the said allegations, the Court added.

Accordingly, the High Court set aside the order dismissing the applicant’s application to revoke the cancellation order as failing the test of natural justice, so as to enable the applicant to respond to the allegations contained in the SCN.

Thus, the High Court decided the case by answering the question of law in favour of the taxpayer.

Lawyer for the applicant/subject: Priyanka Goel

Defendant’s Attorney/Revenue: None appeared

Case Title: Mrs. SS Enterprises v. Chief Commissioner

File number: WP(C) 12183/2024 and CM APPL.50686/2024

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