Registration cannot be cancelled without issuing SCN and providing opportunity of hearing.

Case Title: Roxy Enterprises v. Union of India
Court: High Court of Delhi
Petition No.: W.P.(C) No. 7023 of 2023
Category of Dispute: Cancellation of GST Registration
Date of Judgement: 22 May 2023
Relevant Section(s): Section 29(2) of CGST Act, 2017; Rule 21 and Rule 25 of CGST Rules, 2017

Facts of the Case [¶4–8]

• The petitioner, a sole proprietor operating under the name Roxy Enterprises, was registered under GST in 2022 and engaged in the export of automobile parts and hardware goods from Tri Nagar, Delhi [¶4].
• A show cause notice dated 25.01.2023 was issued to the petitioner proposing cancellation of GST registration citing the reason as “Others,” with no specific grounds disclosed [¶5].
• The petitioner submitted that the notice appeared to be triggered due to delayed responses to summons by the Anti-Evasion wing and non-submission of documents. He claimed all necessary documents were in possession and that he attempted to attend the hearing but was not granted one [¶6].
• An order dated 14.02.2023 was issued cancelling registration on the ground that the taxpayer was “non-existing” as per a report by the Anti-Evasion branch, invoking Section 29(2) of CGST Act and Rule 21 of CGST Rules [¶7].
• The petitioner contended that the finding of “non-existence” was incorrect as he was operating from the declared business premises and no inspection under Rule 25 was conducted or notified to him [¶8].

Question(s) in Consideration [¶9–11]

1. Whether the show cause notice dated 25.01.2023 met the standards required under law for initiating cancellation of GST registration?
2. Whether the cancellation order dated 14.02.2023 was passed in violation of principles of natural justice?

Observation of the Court [¶9–11]

• The Court held that the show cause notice was inadequate, vague, and did not disclose any tangible reason for proposed cancellation, thereby failing to fulfill the legal requirement of due process [¶9].
• It emphasized that adverse orders cannot be passed without apprising the noticee of specific reasons and giving a proper opportunity to respond [¶9].
• The Court also noted that since cancellation was premised on an assumption of non-existence, compliance with Rule 25 (physical verification and notice thereof) was necessary but not evident [¶8, ¶11].

Judgement of the Court [¶10–14]

• The Court set aside both the show cause notice and the cancellation order as being unsustainable and violative of natural justice [¶10].
• The matter was remanded to the proper officer to consider the case afresh after granting full opportunity of hearing to the petitioner [¶11].
• The petitioner was directed to appear with a fresh reply and documents on 26.05.2023 at 10:30 a.m. [¶13].
• The officer was instructed to pass a reasoned, speaking order within two weeks [¶14].

Between Fine Lines

• A GST registration cannot be cancelled based on ambiguous or unexplained reasons like “Others.”
• The show cause notice must contain clear grounds to enable an informed response.
• Physical verification under Rule 25 must be properly conducted and communicated.
• Violation of natural justice—especially lack of hearing—renders cancellation orders void.
• The Court reaffirmed the need for transparency and procedural fairness in GST administration.

Summary of Referred Cases

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