Bombay High Court Restores GST Registration, Finds Mechanical ‘Cyclostyled’ Notice Legally Unsustainable

Bombay High Court Restores GST Registration, Finds Mechanical ‘Cyclostyled’ Notice Legally Unsustainable

Introduction

The Bombay High Court (Kolhapur Bench) has restored the cancelled GST registration of a trader, holding that the show-cause notice and the cancellation order were materially inconsistent and reflected a mechanical exercise of power. A Division Bench of Justice R.G. Avachat and Justice Ajit B. Kadethankar observed that the authority had issued a generic, template-based notice and failed to consider the petitioner’s reply before passing the cancellation order.

Factual Background

The petitioner, Om Enterprises, was served with a show-cause notice proposing cancellation of its GST registration on the ground that it had been obtained by fraud. However, the cancellation order relied on different grounds and contained discrepancies in the allegations and figures mentioned under various heads, some of which reflected “0”. The registration was cancelled retrospectively based on information from the State GST Authority describing the trader as “not genuine.” The trader contended that discontinuation of business had not been properly considered and that the cancellation was legally unsustainable.

Procedural Background

Aggrieved by the cancellation, the petitioner approached the High Court under Article 226 of the Constitution. The GST Department argued that the cancellation was lawful and that the petitioner had an alternative statutory remedy of revocation under Section 30 of the CGST Act.

Issues

1. Whether the show-cause notice and cancellation order suffered from material discrepancies.

2. Whether issuance of a generic, template-based notice satisfies statutory requirements.

3. Whether writ jurisdiction can be invoked despite availability of an alternative remedy under the CGST Act.

Contentions

The Department contended that the cancellation was valid and that the petitioner ought to have sought revocation under Section 30 of the CGST Act. The petitioner argued that the authority acted mechanically, issuing a “cyclostyled” notice without application of mind and passing an order on grounds different from those contained in the show-cause notice.

Reasoning and Analysis

The Bench noted that the show-cause notice was a cyclostyled document and that the authority had not adverted to its contents or the petitioner’s reply while passing the impugned order.

The Court observed that serious discrepancies existed between the grounds mentioned in the notice and those relied upon in the cancellation order. Such inconsistency, it held, was apparent on the face of the record. While acknowledging that writ jurisdiction is generally not exercised where statutory remedies are available, the Court held that intervention was warranted because the authority failed to properly exercise its jurisdiction and acted in a casual and mechanical manner.

The Bench emphasised that cancellation of GST registration, particularly with retrospective effect, has significant civil consequences and must be preceded by a reasoned notice reflecting due application of mind.

Decision

The Bombay High Court set aside the impugned cancellation order and restored the GST registration of Om Enterprises. The Court rejected the Department’s reliance on the remedy of revocation under Section 30 and held that the defective notice and inconsistent order justified exercise of writ jurisdiction.

In this case the petitioner was represented by Mr. Bharat Raichandani and Mr. Pritesh Kumar, Advocate.