M/S. Goutham Constructions vs. The Joint Commissioner Of Central Tax GST Appeals- Ii

Held

The Court held that while the initial Show Cause Notice dated May 13, 2025, was vague, the petitioner failed to diligently raise this concern at the initial stage and did not place material on record to demonstrate this. The Court noted that the petitioner was later informed of the specific reason for cancellation (ineligible ITC from a non-existent entity) through a notice dated July 23, 2025, in response to its revocation application, to which the petitioner did not respond. The Court found that the Appellate Authority should have considered all circumstances and interfered with the Appellate Authority's impugned order. The Court decided to restore the proceedings to the third respondent (Superintendent of Central Tax) with liberty to the petitioner to file a response to the Show Cause Notice dated May 13, 2025, and to produce documents demonstrating the genuineness of transactions with M/s. S M Traders. The Court directed that if the petitioner produces such documents, the GST registration must be restored. The Court quashed the Order-in-Appeal, the Order of Rejection of Application for Revocation, and the Show Cause Notice for rejection of revocation application. The petitioner was given time to file its response by October 27, 2026, and the third respondent was directed to conclude proceedings by November 30, 2026.

Facts

The petitioner, M/s. Goutam Constructions, filed a writ petition challenging the cancellation of its GST registration. The cancellation process began with a Show Cause Notice dated May 13, 2025, issued by the Superintendent of Central Tax (Respondent No. 3), citing Rule 21(b) of the CGST Rules for alleged violation. The petitioner claims its response to this notice was not considered due to a missing acknowledgment number. Subsequently, an Order for Cancellation of Registration was issued on May 23, 2025. The petitioner's application for revocation of cancellation was rejected on August 6, 2025, with a Show Cause Notice for rejection issued on July 23, 2025, which first specified the reason for cancellation as claiming ineligible Input Tax Credit (ITC) of Rs. 8,87,014/- for FY 2024-25 from M/s. S M Traders, identified as a non-existing entity. The Order-in-Appeal dated December 1, 2025, upheld the rejection. The petitioner sought to quash these orders and notices, and for reinstatement of its GST registration.

Key Issues

1. Whether the initial Show Cause Notice dated May 13, 2025, issued under Rule 21(b) of the CGST Rules, was sufficiently specific to put the petitioner on notice regarding the grounds for cancellation of its GST registration? 2. Whether the petitioner was afforded a proper opportunity to respond to the allegations leading to the cancellation of its GST registration, particularly concerning the claim of ineligible ITC from M/s. S M Traders? Petitioner's Arguments: The petitioner argued that the initial Show Cause Notice was vague, merely referring to Rule 21(b) without specifying the exact violation. It contended that its response to this notice was not considered. The petitioner further argued that it was only apprised of the specific reason for cancellation (claiming ineligible ITC from a fake entity) through a notice dated July 23, 2025, in response to its revocation application. The petitioner asserted it could produce documents to prove the genuineness of transactions with M/s. S M Traders. The primary argument was for interference with the initial vague Show Cause Notice, with an alternative plea for an opportunity to respond. Revenue's Arguments: The revenue, represented by the learned Standing Counsel, did not explicitly argue on the vagueness of the initial notice but focused on whether the Court should interfere with the Show Cause Notice or restore proceedings for the petitioner to file a reply.