Delhi HC quashes 'deficient' show cause, restores GST registration for firm

New Delhi: The Delhi High Court has quashed a Show Cause Notice (SCN) due to its lack of justification and reinstated the suspended Goods and Services Tax (GST) registration of a metals manufacturer.

A bench of Justices Vibhu Bakhru and Tushar Rao Gadela observed that the SCN was deficient in failing to sufficiently explain why the petitioner's GST registration was suspended or was proposed to be cancelled.

"Prima facie, we are of the view that the impugned show cause notice cannot be sustained. It is bereft of any particulars and does not sufficiently set out the reasons why the petitioner's GST registration is proposed to be cancelled.

"It is well settled that a show cause notice must clearly set out the reasons for proposing an adverse action in order for the noticee to respond to the same," the bench added.

Petitioner Rishiraj Aluminium Pvt. Ltd. argued that the only reason mentioned in the SCN for proposing cancellation of their GST registration was "ceased to be liable to pay tax".

The petitioner stated that they have been consistently filing their tax returns and paying taxes on time. Nonetheless, their GST registration was suspended based on the vague reason provided in the show cause notice.

The court nullified the show cause notice and directed the restoration of the GST registration.

"There is merit in the petitioner's contention that in the present case, the petitioner was at a loss as to how to respond to the impugned show cause notice as it did not disclose any intelligible reason for proposing cancellation of the petitioner's registration.

"In view of the above, the impugned show cause notice is set aside. The petitioner's GST Registration is restored," it said.

While disposing of the application, the bench clarified that "this would not preclude the respondent from issuing a fresh SCN, clearly setting out the reasons for proposing to cancel the petitioner's GST Registration, in the event the respondent desires to proceed with the said action".