GST Registration Cancellation Scrapped Due To Vague SCN & Mechanical Approach: Bombay High Court Analysis
Background of the Dispute
In Om Enterprises vs Om Enterprises, the Bombay High Court examined whether the cancellation of a GST registration could stand when founded on a vague show-cause notice and an order passed without proper application of mind.
The assessee’s GST registration was first suspended and then cancelled by the respondent authority. The trigger was a show-cause notice dated 12 October 2022, alleging that the registration had been obtained through fraud, wilful misstatement, or suppression of material facts. Despite the assessee’s detailed response, the registration was cancelled by order dated 28 October 2022.
The Court was called upon to decide:
- Whether such a cyclostyled, non-specific show-cause notice satisfies the statutory requirements; and
- Whether the cancellation order, passed in a mechanical manner and contrary to the record, could be sustained.
Timeline of Key Events
12 October 2022
- A show-cause notice for cancellation of GST registration was served on the assessee.
- The notice alleged, in general terms, that the registration had been obtained by “fraud, wilful misstatement or suppression of facts”.
- The assessee was directed:
- To furnish a reply within seven working days, and
- To appear for a personal hearing on 19/10/2022 at 12:10 PM.
- The notice recorded that failure to reply or appear would result in an ex parte decision.
- It also stated that the assessee’s registration stood suspended with effect from 12/10/2022.
22 October 2022
- The assessee submitted a reply contesting the proposed cancellation and explaining its position.
28 October 2022
- The respondent authority passed an order cancelling the GST registration.
- The effective date of cancellation was mentioned as 12/10/2022.
- A table included in the order showed nil amounts under tax, interest, penalty, and other components.
Writ before Bombay High Court
- Aggrieved by the cancellation, the assessee approached the High Court under Article 226 of the Constitution of India, challenging both the show-cause notice and the cancellation order.
Contents of the Show-Cause Notice
The show-cause notice issued on 12 October 2022 proceeded on a single, broadly worded allegation:
“In case, Registration has been obtained by means of fraud, wilful misstatement or suppression of facts.”
No specific factual instances, transactions, documents, or discrepancies were cited. The notice did not spell out:
- How the registration was allegedly obtained by fraud,
- What misstatements were claimed to be wilful, or
- What facts were supposedly suppressed.
The notice was clearly in a cyclostyled or template format, with minimal customization to the assessee’s case.
The assessee was:
- Asked to reply within seven working days; and
- Directed to appear for a personal hearing on 19/10/2022, failing which the matter would be decided on available records on an ex parte basis.
The notice also clarified that the GST registration stood suspended from 12/10/2022.
Contents of the Cancellation Order
Despite the reply filed by the assessee, the proper officer issued an order titled “Order for Cancellation of Registration” on 28 October 2022, referring to the reply dated 22/10/2022.
The order stated that:
- The reply and submissions at the time of hearing were examined, and
- The proper officer was of the opinion that the registration was liable to be cancelled.
However, the reason actually recorded in the order was:
“State GST Office written letter to this Office that they visited the premises & found that the party is not genuine, on that basis the SCN in form REG 17 given to the party on 12/10/2022, as no response received from taxpayer the cancellation is hereby cancelled.”
Two crucial aspects stood out: