Dee Cubes Diamonds PVT. LTD. vs. State Of Gujarat

Held

The Court held that the show-cause notice dated 26.05.2022 was bereft of valid reasons for the proposed cancellation of registration. The notice merely stated a general allegation without specifying the basis or providing supporting materials, despite the petitioner's requests for details. This lack of specificity violated the principles of natural justice, as reasons are considered the heart and soul of an order, and their non-communication amounts to a denial of a reasonable opportunity of hearing. The Court relied on its previous decision in Aggarwal Dyeing and Printing Works (Supra) to underscore this principle. Consequently, both the show-cause notice and the consequential order of cancellation of registration dated 11.10.2022 were quashed and set aside. The Court directed the restoration of the petitioner's registration forthwith, while granting liberty to the respondents to issue a fresh notice with particulars of reasons and details, provide a reasonable opportunity of hearing, and pass a speaking order on merits. The Court explicitly stated that it had not gone into the merits of the matter.

Facts

The petitioner, Dee Cubes Diamonds Pvt. Ltd., engaged in bullion trading, had its GST registration cancelled by the State GST Officer. The cancellation order dated 11.10.2022 followed a show-cause notice dated 26.05.2022, which alleged the petitioner was issuing invoices without supply of goods/services, leading to wrongful availment of Input Tax Credit (ITC). The petitioner contended the show-cause notice was vague, lacked supporting materials, and was not responded to with proper consideration. They had previously reversed ITC of Rs. 90,00,000/- and paid Rs. 2,00,00,000/- under protest after a search by the Central GST Department. The petitioner argued the cancellation order was beyond the scope of the notice and violated principles of natural justice. The respondents argued that the procedure was followed, and the petitioner's reply was not substantiated.

Key Issues

1. Whether the show-cause notice dated 26.05.2022, alleging issuance of invoices without supply of goods and/or services leading to wrongful availment or utilization of input tax credit or refund of tax, is legally tenable and sufficiently reasoned as per the provisions of the Goods and Services Tax Act, 2017 and its rules, thereby satisfying the principles of natural justice? The petitioner argued that the show-cause notice was vague, non-speaking, bereft of any reasons, and lacked supporting materials, making it impossible to respond adequately. They contended that the consequential order of cancellation of registration was arbitrary and in breach of natural justice. They relied on the decision in Aggarwal Dyeing and Printing Works Vs. State of Gujarat & Ors. to support their claim that a reasonless show-cause notice should be quashed. The respondents argued that the show-cause notice was served, and although the petitioner filed a reply late and without supporting documents, the procedure contemplated under the Act was followed. They asserted there was no illegality warranting interference by the Court.