M/s Chauhan Construction Co. v. Commissioner of DGST & Anr.
Delhi High Court
W.P.(C) 12506/2024
Category of dispute: Cancellation of GST Registration
Date of judgment: 06 September 2024
Facts
The petitioner, a proprietorship concern engaged in construction activity, was subjected to cancellation of its GST registration vide order dated 05.04.2021, issued pursuant to a show cause notice dated 26.03.2021. The sole allegation in the show cause notice was a verbatim reproduction of statutory language alleging issuance of invoices without supply of goods or services leading to wrongful availment of input tax credit. The notice neither disclosed factual particulars nor specified any date, time, or venue for personal hearing, although it purported to grant such an opportunity. Simultaneously, the petitioner’s registration was suspended from the date of the notice.
Subsequently, multiple applications for revocation of cancellation were filed by the petitioner. Each application was met with mechanical show cause notices proposing rejection on vague and unintelligible grounds such as “reason not appropriate” or non-admissibility under notifications, again without affording any effective opportunity of personal hearing. Ultimately, all such applications and even the statutory appeal under Section 107 of the CGST Act were rejected, primarily on the ground of non-appearance or non-response, despite the portal access being effectively blocked due to suspension of registration
Questions for consideration
The principal issue before the High Court was whether the cancellation of GST registration and the subsequent rejection of revocation applications could be sustained when the foundational show cause notices were vague, non-speaking, and issued in violation of the principles of natural justice. A connected issue was whether retrospective cancellation of registration could be sustained in the absence of any proposal or reasoning to that effect in the show cause notice
Observations of the Court
The Court noted that the original show cause notice merely reproduced a statutory provision without disclosing any factual basis or intelligible reason for proposing cancellation. Such a notice, the Court observed, failed to meet the minimum requirement of informing the taxpayer of the precise allegations so as to enable an effective response. The absence of any specified date, time, or venue for personal hearing, despite a purported offer of such hearing, rendered the process illusory and procedurally unfair.
The Court further observed that although the show cause notice did not propose retrospective cancellation, the final cancellation order cancelled the registration from the date of grant, i.e., 15.10.2018, without assigning any reasons. This, according to the Court, was a serious infraction of statutory discipline and procedural fairness.
Equally, the Court found that the subsequent show cause notices issued during revocation proceedings were equally defective, as they neither disclosed reasons nor complied with the requirement of affording a meaningful opportunity of hearing. The rejection orders were found to be non-speaking and based merely on alleged non-response, without examining whether the notices themselves were legally sustainable
Judgment
The Delhi High Court held that the cancellation order, the original show cause notice, and all subsequent rejection orders were vitiated for violation of the principles of natural justice and absence of intelligible reasoning. Accordingly, the impugned cancellation order and the show cause notice were set aside, and the respondents were directed to forthwith restore the petitioner’s GST registration.
The Court directed the petitioner to file all pending GST returns within thirty days and discharge the applicable tax, interest, and penalty, if any. Importantly, the Court clarified that the order would not preclude the department from initiating fresh proceedings in accordance with law, provided such action complies with statutory requirements and procedural safeguards
Relevant statutory provisions
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Section 29, CGST Act, 2017 – Cancellation of registration
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Section 30, CGST Act, 2017 – Revocation of cancellation
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Section 107, CGST Act, 2017 – Appeals to Appellate Authority
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Rule 22, CGST Rules, 2017 – Procedure for cancellation
Cases referred and relied upon – summary table
| Case | Court | Core issue | Verdict |
|---|---|---|---|
| M/s Chauhan Construction Co. v. Commissioner of DGST | Delhi High Court | Vague SCN and retrospective cancellation without hearing | GST registration restored; cancellation held void |
Between the fine lines – practical takeaway for trade and industry
This judgment reinforces that GST registration cannot be cancelled on the basis of templated, non-speaking notices that merely reproduce statutory language. Taxpayers must be informed of specific allegations and afforded a real opportunity of hearing, and retrospective cancellation cannot be imposed unless clearly proposed and justified. For businesses, the ruling provides strong grounds to challenge mechanical cancellations and revocation rejections that are driven by portal-generated notices rather than due process.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
