Case Reference
M/s Discovery India Service v. Principal Commissioner of Goods and Service Tax, North Delhi, High Court of Delhi, W.P.(C) 10954/2024, decided on 08 August 2024.
Facts
The petitioner, a registered taxable person under the Central Goods and Services Tax Act, 2017, was issued a show cause notice proposing cancellation of GST registration on the solitary ground mentioned under Section 29(2)(e), namely that the registration was obtained by fraud, wilful misstatement or suppression of facts (paras 3–6). The notice was accompanied by an internal communication alleging that the petitioner was “non-existent”, though no inspection report, panchnama, photographs or supporting material forming the basis of such allegation were furnished to the petitioner (paras 6, 10–12). Despite a detailed reply enclosing documents evidencing existence at the declared place of business, the Proper Officer proceeded to cancel the registration retrospectively from the date of grant, without adverting to the reply or assigning reasons (paras 8–9, 14).
Questions for Consideration
Whether cancellation of GST registration could be sustained when:
(i) documents relied upon by the department were not supplied to the taxpayer,
(ii) the reply to the show cause notice was not considered in the cancellation order, and
(iii) retrospective cancellation was ordered without such proposal being put to notice (paras 12–14).
Observations
The Court noted that the impugned order was a non-speaking order, bereft of reasons and wholly silent on consideration of the taxpayer’s reply (para 9). It was emphasised that when adverse material such as inspection reports, panchnama and photographs form the substratum of the proposed action, non-supply thereof amounts to a clear breach of audi alteram partem (paras 12–13). The Bench further observed that retrospective cancellation constitutes a serious civil consequence and, in absence of a specific proposal in the show cause notice, the petitioner was deprived of an effective opportunity to respond (para 14).
Judgement
The High Court set aside both the show cause notice and the cancellation order, holding that the proceedings were vitiated by violation of principles of natural justice and lack of a reasoned adjudication (paras 13–15). Liberty was reserved to the department to initiate fresh proceedings by issuing a comprehensive show cause notice, enclosing all relied-upon material and passing an order strictly in accordance with law (para 15). All rights and contentions were expressly kept open (para 16). The writ petition was disposed of accordingly (para 17).
Statutory Framework Involved
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Section 29(2)(e), CGST Act, 2017 – Cancellation of registration obtained by fraud, wilful misstatement or suppression of facts.
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Principles of natural justice implicit in adjudicatory proceedings under the CGST regime.
Cases Referred and Their Verdict
| Case referred | Court | Core issue | Verdict |
|---|---|---|---|
| Not specifically cited | — | — | — |
(The judgment proceeded on settled principles without reliance on external precedents.)
Between Fine Lines – Practical Takeaway for Trade
Cancellation of GST registration cannot rest on undisclosed inspection material or cryptic orders. Where the department relies on reports or evidence to allege non-existence or fraud, such material must be furnished and the taxpayer’s reply must be meaningfully examined. Retrospective cancellation, in particular, demands explicit notice and heightened procedural fairness, failing which the action is liable to be quashed.
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.”
