GST registration cancellation requires a specific show-cause notice and a reasoned order.

The petitioner, sole proprietor of “Economic Solution,” held GST Registration No. 18AOKPM2873DIZS, effective from 18 May 2018, with liability commencing from 1 February 2018.

On 29 June 2020, the Proper Officer issued a show-cause notice proposing cancellation under Section 29(2)(c) of the CGST Act on the ground that the petitioner had not filed returns for a continuous period of six months.

The notice did not identify the specific months of default or appoint a date and time for personal hearing.

The petitioner subsequently filed the pending GSTR-3B returns for the period from March 2019 to May 2020 on 23 September 2020 and thereafter filed returns up to February 2024.

Nearly four years after the show-cause notice, the Proper Officer passed an order dated 5 June 2024 cancelling the registration retrospectively from 30 June 2020.

The order stated that a reply dated 30 June 2020 had been examined, although the petitioner had not submitted a reply, and did not provide specific reasons for cancellation.

The petitioner challenged the cancellation order under Article 226 of the Constitution.

Whether the show-cause notice was legally valid when it failed to specify the relevant period of return default and did not provide a definite date and time for personal hearing.

Whether the cancellation order was valid when it was non-speaking, recorded consideration of a reply that was allegedly never filed, and failed to consider the petitioner’s subsequent filing of all pending returns.

Whether the Proper Officer was required to consider the subsequent filing of returns and the statutory mechanism under the proviso to Rule 22(4) before cancelling the petitioner’s registration.

Whether the delay in approaching the High Court justified refusing relief despite procedural and statutory defects in the notice and cancellation order.

The Court applied Sections 29(2)(c) and 39(1) of the CGST Act, under which registration may be cancelled for failure to furnish prescribed returns and registered persons must file periodic returns.

Rule 21(h) of the CGST Rules makes registration liable to cancellation where monthly returns have not been furnished for a continuous period of six months.

Rule 22 requires issuance of a show-cause notice in Form GST REG-17, submission of a reply in Form GST REG-18, and a reasoned cancellation order in Form GST REG-19; where the reply is satisfactory, proceedings must be dropped in Form GST REG-20.

The proviso to Rule 22(4) requires proceedings to be dropped where, instead of replying to a notice under Section 29(2)(b) or (c), the taxpayer furnishes all pending returns and pays the applicable tax, interest and late fee.

The Court also relied on the natural-justice requirement that a show-cause notice must disclose the precise case to be met and that an order involving adverse civil consequences must be reasoned.

Citing Commissioner of Central Excise v. Brindavan Beverages (P) Ltd., (2007) 5 SCC 388, the Court held that a vague show-cause notice deprives the noticee of an effective opportunity to respond.

The Court held that the show-cause notice was defective because it merely alleged non-filing of returns for six months without identifying the relevant months or period of default, and referred to a personal hearing without specifying its date and time.

The cancellation order was equally infirm: it did not assign specific reasons, incorrectly recorded that a reply dated 30 June 2020 had been examined, and failed to satisfy the requirement of a reasoned order under Rule 22 and Form GST REG-19.

Further, by the date of the order, the petitioner had filed the returns that were allegedly in default and had continued filing returns up to February 2024.

The original cause mentioned in the 2020 notice therefore required fresh consideration in light of the subsequent facts.

The Proper Officer failed to consider those facts and also failed to examine whether the proceedings were required to be dropped under the proviso to Rule 22(4).

The petitioner’s failure to initially reply to the notice did not absolve the authority of its duty to issue a proper notice and pass a reasoned order, particularly because cancellation had adverse civil consequences.

Although the petition was filed after delay, the Court considered the statutory and natural-justice violations sufficiently serious to outweigh the delay.

The matter was remitted to the Proper Officer to reconsider the petitioner’s filing of the previously pending returns and to proceed strictly under Rule 22 of the CGST Rules, culminating in an appropriate order in the prescribed form, as applicable, within one month.

No order as to costs was made.