Nikita Agrawal vs. The Assistant Commissioner Of Revenu And Ors.
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The appellant, Nikita Agarwal, challenged an order of retrospective cancellation of her GST registration. The Assistant Commissioner issued a show cause notice on March 24, 2022, for obtaining registration by fraud, willful misstatement, or suppression of facts, suspending the license from that date. The appellant failed to submit a reply, and the Assistant Commissioner cancelled the registration retrospectively from May 9, 2019, by an order dated April 5, 2022. An application for revocation was rejected for non-submission of reply within time. The appellant's appeal to the Senior Joint Commissioner was dismissed on May 30, 2023. The appellant then filed a writ petition, which was initially dismissed by a Single Bench for delay, but the High Court found the explanation for the delay reasonable given the pending constitution of the GST Appellate Tribunal and the recent notices received by the appellant's customers. The High Court treated the appeal and writ petition together for disposal.
Held
The Court held that the show cause notice was fundamentally flawed due to its vagueness. It failed to specify whether the grounds for cancellation were fraud, willful misstatement, or suppression of facts, thereby denying the appellant an effective opportunity to present her defence, as mandated by principles of natural justice and as emphasized in Oryx Fisheries Private Limited. The Court also found the retrospective cancellation of registration to be bad in law. The show cause notice did not propose retrospective cancellation, and Section 29(2) of the CGST Act, 2017, requires such cancellation to be based on objective criteria and not merely mechanical, as highlighted in Ramesh Chander. The Court noted the adverse consequences for the appellant's customers due to the retrospective cancellation. The inherent defect in the show cause notice, being a jurisdictional error, could not be rectified at any stage. Therefore, the retrospective cancellation of the appellant's registration and the appellate order affirming it were set aside. The authorities were directed to restore the registration and then consider the application for an additional place of business.
Key Issues
1. Whether the show cause notice issued for cancellation of GST registration was vague and lacked sufficient particulars, thereby vitiating the entire proceedings? (Question of law, turning on principles of natural justice and fair procedure). 2. Whether the cancellation of GST registration with retrospective effect was permissible and justified, considering the absence of such a proposal in the show cause notice and the potential consequences for the taxpayer's customers? (Question of law, turning on Section 29(2) of the CGST Act, 2017). Petitioner's Arguments: The petitioner argued that the show cause notice was fundamentally defective as it was vague and did not specify whether the grounds for cancellation were fraud, willful misstatement, or suppression of facts, thus denying an effective opportunity to rebut allegations. She also contended that the retrospective cancellation was not proposed in the show cause notice and was done mechanically without proper application of mind, citing the Supreme Court's decision in Oryx Fisheries Private Limited and the Delhi High Court's ruling in Ramesh Chander. Revenue's Arguments: The judgment does not record any specific arguments made by the revenue or state.
Sections Cited
Section 29(2)
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Cause title — parties, addresses and appearances
order of cancellation of the appellant’s registration with retrospective effect. Learned Single Bench opined that the writ petitioner has approached the Court after a period of two years after the order was passed by the Appellate Authority. The explanation offered by the appellant is that since the Tribunal was to be constituted the appellant had awaited for constitution of Tribunal but as a consequence of rejection of the appeal the appellant’s customers received the notice during March 2025 proposing to recover tax on the ground that the appellant’s registration has been cancelled retrospectively which prompted the appellant to approach the writ Court. In our view the explanation offered appears to be reasonable and the writ petitioner cannot be thrown out on the ground of laches and delay. Moreover, when the Appellate Tribunal is yet to be constituted.
For the purpose of disposal of the appeal and the writ petition disputed questions of facts of the case need not be gone into and the documents are required to 3 be perused. The authority, namely, the Assistant Commissioner issued show cause notice to the appellant on 24.03.2022 for cancellation of registration of the appellant on the ground that registration obtained by means of fraud, willful misstatement or suppression of facts. The license was suspended with effect from the said date. Show cause notice was issued on 23.05.2022 and the appellant was directed to appear before the authority on 30th May, 2022. Since no reply was submitted by the appellant, the authority, namely the Assistant Commissioner, by order dated 5.4.2022 cancelled the registration with retrospective effect i.e. 9.5.2019. The appellant filed an application for revocation of the order of retrospective cancellation of the registration. Show cause notice was issued on the said application on 2.5.2022. The application was rejected stating that the reply to the show cause notice has not been filed within the time permitted. The case of the appellant is that she appeared before the authority and sought for adjournment. A letter was also given but without adjourning the matter and without considering the request for adjournment the application was rejected. Having left with no other alternative, an appeal was preferred before the Appellate Authority. The appeal was dismissed by order dated 30.05.2023 and on going through the 4 appellate order we find that for the first time the appellant has made known about the allegations levelled against her by the department. At no earlier point of time the appellant was put on notice about such allegations. In fact, the appellate authority has noted the documents filed by the appellant but has stated that the documents are not related in any way to the instant case. The explanation offered by the appellant is that in the meantime there was an additional place of business and since registration was cancelled details could not be uploaded in the portal. Further, it is pointed by the appellant in paragraph 4 of the appellate authority’s order the appellate authority recorded that one Sri Naskar told that she was one of the landlords but she was staying abroad for last ten years. If this is so then the identity of the landlord cannot be disputed by the department. In any event, issuance of show case notice is not an empty formality as the noticee is entitled to have an effective opportunity to put forth his/her submission. In this regard we take note of the decision of the Hon’ble Supreme Court in the India & Ors. reported in 2010(13) SCC 427 wherein the Hon’ble Supreme Court pointed out that while Division & Anr. reported in (2024) 14 Centax 318 (Del) wherein the Court took into consideration Section 29(2) of CGST Act 2017 which empowers the proper officer to cancel the GST registration of a person from such date including any retrospective date as he may deem fit and proper if the circumstances set out in Sections are satisfied. The Court held that registration cannot be cancelled with retrospective effect mechanically and it can be cancelled by a proper officer if he deems it fit and proper. Such satisfaction cannot be subjective but must be based on some objective criterion. It was further held that merely because a tax payer has not filed the return for the said period does not mean taxpayer’s registration must be cancelled with retrospective date also covering the period when the returns were filed and taxpayers was compelled to do so.
Furthermore, the Court also took into consideration the consequencial effect of such 7 retrospective cancellation on the taxpayer’s customers and it was held that the taxpayer’s registration can be cancelled with retrospective effect only when such consequences are intended and not warranted. In the case on hand nothing is forthcoming from the department as to under what circumstances such power of retrospective cancellation of registration was resorted to. What is apprehended by the Hon’ble Court in Ramesh Chander (supra) as occurred in the assesse’s case since the customers have been issued notice for recovery of tax, penalty and interest as pointed earlier if there is an inherent defect in the show cause notice the defect cannot be cured at any stage or subsequent stage of the proceeding nor before the appellate authority. That apart, the department cannot be given a second lease of life to resurrect the matter once again by issuance of a fresh show cause notice.
For the above reasons, retrospective cancellation of the appellant’s registration and the order passed by the Appellate Authority affirming such retrospective cancellation are bad in law. In the result, the appeal and the connected application as well as the writ petition are allowed and the orders of retrospective cancellation of registration of the appellant is set aside and the authorities are directed to restore the 8 registration with retrospective effect and thereafter consider the application filed by the appellant for additional place of business in accordance with law.
Urgent Photostat certified copy of this judgment and order, if applied for, be delivered to the learned advocates for the parties, upon compliance of all formalities. [T.S. SIVAGNANAM] CHIEF JUSTICE [CHAITALI CHATTERJEE (DAS), J.]
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.