Petitioner Not Served with Show Cause Notice Post GST Registration Cancellation: Delhi HC Sets Aside Demand Order

In a significant ruling, the Delhi High Court has set aside an order demanding Rs. 7,56,66,476 from M/S Jain Cement Udyog, emphasizing the failure of service of a Show Cause Notice due to the retrospective cancellation of GST registration. The bench of Hon’ble Mr. Justice Sanjeev Sachdeva and Hon’ble Mr. Justice Ravinder Dudeja delivered the judgment on April 4, 2024, addressing crucial aspects of natural justice and procedural fairness under the CGST Act.

The judgment revolved around the procedural improprieties in the issuance of a Show Cause Notice under Section 73 of the Central Goods and Services Tax Act, 2017. The core issue was the alleged non-receipt of the notice and subsequent order by the petitioner, following a retrospective cancellation of GST registration.

M/S Jain Cement Udyog, represented by Mr. R.P. Singh, challenged the order dated December 4, 2023, which demanded the substantial sum including penalty for under-declaration of output tax, excessive claim of Input Tax Credit, and claims from cancelled dealers. The petitioner contended non-receipt of the Show Cause Notice and the impugned order due to the retrospective cancellation of their GST registration effective July 26, 2017.

Jurisdiction under CGST Act: The High Court found merit in the petitioner’s argument, ruling that the impugned order was unsustainable as it was passed without consideration of the effect of retrospective GST registration cancellation.

Natural Justice and Fairness: Emphasizing procedural fairness, the Court noted the failure to serve the Show Cause Notice deprived the petitioner of the opportunity to present their case, thereby breaching principles of natural justice.

Re-adjudication Directions: The Court directed re-adjudication of the matter, ordering the petitioner to submit a reply within 30 days, followed by a fresh order from the Proper Officer after a personal hearing.

Regarding Multiple Proceedings: The judgment clarified that this decision does not prejudice ongoing proceedings by the Directorate General of Goods and Services Intelligence, Ghaziabad Regional Unit, based on another notice for the same tax period.

Notification Challenge: The challenge to Notification No. 9 of 2023 regarding the extension of time was left open, with the Court not commenting on its merits.

The petition was disposed of with instructions for re-adjudication in line with statutory provisions. The Court emphasized the preservation of all rights and contentions of the parties involved.

Date of Decision: April 4, 2024

M/S Jain Cement Udyog vs Central Board of Indirect Taxes and Customs & Anr.