Sreejith K. Prop. Of M/S Sridev Traders vs. State Of Gujarat

Facts

The petitioner, Sreejith K., proprietor of M/s Sridev Traders, obtained GST registration on October 6, 2021. On November 8, 2021, tax invoices and e-way bills were generated for a purchase of Areca Nuts worth Rs. 63,70,000/-. The goods were intercepted in transit on November 13, 2021, by the State Mobile Squad. The driver's statement was recorded, and GST-MOV-01 and 02 were issued. A detention order (GST MOV 6) was issued on November 17, 2021. The petitioner claims no notice of detention was served. After representations and personal appearances for interrogation, the petitioner received a show cause notice dated December 14, 2021, proposing cancellation of registration, which was stated to be suspended. Subsequently, on December 30, 2021, an order cancelling the petitioner's registration was uploaded on the portal. The petitioner filed the present writ application challenging these notices and orders.

Held

The Court held that the show cause notice dated December 14, 2021, was not tenable in law as it lacked material particulars, making it impossible for a prudent person to respond effectively. The reasons provided were a mere incorporation of grounds from the rules, without specifying how the authority prima facie found fraud, willful misstatement, or suppression of facts. Furthermore, the order of cancellation of registration relied on new material, specifically a letter dated December 14, 2021, from the State Tax Officer (Enforcement) regarding investigation proceedings under Section 67(2) of the GGST Act, 2017. This new material was neither part of the show cause notice nor disclosed to the petitioner, thus violating the principles of natural justice by depriving the petitioner of a reasonable opportunity to present their case. The Court found the respondent authority's action illegal and requiring interference. Consequently, the show cause notice and the cancellation order were quashed and set aside, and the matter was remitted back to the respondent authority for de novo proceedings. The GSTIN registration of the petitioner was directed to be restored.

Key Issues

1. Whether the show cause notice dated 14.12.2021 and the consequential order of cancellation of registration dated 30.12.2021 are valid in the eye of law, specifically concerning the adherence to principles of natural justice and the sufficiency of material particulars provided? (Section 29 of the GGST Act, 2017 read with Rule 22 of the Rules framed thereunder). Contentions: Petitioner: The show cause notice is bereft of material details and the reasons assigned are vague. The respondent authority should not have proceeded to pass the consequential order of cancellation based on such a vague notice. The cancellation order relied on new material not disclosed to the petitioner, violating principles of natural justice. Revenue/State: The learned Assistant Government Pleader defended the order of cancellation of registration.