M/S Rana Enterprises vs. State Tax Officer And 2 Others

Held

The Court held that the adjudication order dated 19.02.2025 was vitiated due to the improper service of the show-cause notice. The Court agreed with the petitioner's contention that once GST registration is cancelled, a taxpayer may not be obligated or able to regularly check the common portal for notices. The Commissioner's Circular dated 07.05.2025, mandating physical service of notice in cases where adjudication proceedings are initiated after registration cancellation, was found to be based on sound common sense and binding on subordinate authorities. The Court reasoned that proceeding ex parte without ensuring actual notice to the petitioner, especially after registration cancellation, was contrary to principles of natural justice. Therefore, the impugned adjudication order was set aside. The Court directed the petitioner to file their final reply to the show-cause notices within two weeks, with liberty to apply for cross-examination or supply of documents. The adjudicating authority was directed to decide such applications before fixing a hearing date and to pass a reasoned order within one month after a personal hearing, with proceedings to conclude by 31.12.2026.

Facts

The petitioner, M/S Rana Enterprises, challenged an adjudication order dated 19.02.2025, passed by the Assistant Commissioner, State Tax, Agra, under Section 74 of the UP GST Act, 2017. The petitioner's registration was cancelled on 01.05.2024. A show-cause notice was issued electronically on 28.09.2024 for the assessment year 2020-2021, more than two years after the registration cancellation. The petitioner claims to have been unaware of these proceedings, which proceeded ex parte. Knowledge of the adjudication order was gained only when recovery proceedings were initiated. A Circular dated 07.05.2025 from the Commissioner of Commercial Tax, U.P., mandated physical notice service for adjudication proceedings initiated after registration cancellation.

Key Issues

1. Whether the adjudication order passed under Section 74 of the UP GST Act, 2017, is vitiated due to the issuance of a show-cause notice electronically on the common portal after the cancellation of the petitioner's GST registration, rendering the petitioner unaware of the proceedings? Petitioner's contention: The petitioner argued that once their registration was cancelled on 01.05.2024, they were no longer obligated or necessarily able to monitor the common portal for notices. The electronic show-cause notice dated 28.09.2024, issued for the assessment year 2020-2021, was therefore ineffective, leading to an ex parte adjudication order of which they only became aware through recovery actions. They relied on the Commissioner's Circular dated 07.05.2025, which mandates physical notice service in such circumstances. Revenue's contention: The Standing Counsel, confronted with the Commissioner's Circular, conceded that there was no quarrel with the proposition that physical notice should have been served.