The case revolves around a petition filed under Article 226 of the Constitution of India, challenging orders issued by the Central Goods and Services Tax (CGST) Authority. The controversy began with a registration certificate granted to the petitioner on June 28, 2021, followed by a voluntary application for cancellation of this registration submitted on May 9, 2023. Initially, the CGST Authority accepted this cancellation, effective from May 8, 2023.

However, on February 20, 2024, the CGST Authority unexpectedly revoked this cancellation and issued a show cause notice on February 26, 2024, questioning the legitimacy of the registration obtained by the petitioner. This culminated in a retrospective cancellation of the registration, dating back to June 27, 2020.

The petitioner argued that the actions taken by the CGST Authority were contrary to the principles of natural justice. Specifically, there was no opportunity for a hearing prior to the revocation of the cancellation, and the show cause notice did not specify that the registration would be canceled with retrospective effect. Additionally, the petitioner claimed an inadvertent oversight in not responding to the show cause notice due to an email notification.

Conversely, the respondents maintained that the cancellation was initiated based on findings from the State GST Authorities, who alleged the petitioner’s involvement in fraudulent activities related to Input Tax Credit (ITC).

The court carefully examined the decision-making process leading to the revocation of the cancellation and subsequent registration cancellation. It determined that the CGST Authority had acted improperly by not providing a hearing or sufficient notice before restoring the cancellation of the registration. Notably, the order rejecting the application for voluntary cancellation failed to provide clear reasoning, indicating a lack of proper consideration.

Moreover, the court raised concerns regarding the retrospective nature of the cancellation. Since the registration was granted on June 28, 2021, the court found no logical basis for cancelling it effective from a date prior to its issuance.

Ultimately, the court quashed the CGST orders dated February 20, March 8, and May 9, 2024, restoring the petitioner’s registration cancellation as of May 8, 2023. The court allowed the CGST Authority to proceed with a new show cause notice regarding the revocation of cancellation, mandating a decision to be communicated by January 31, 2025. Importantly, the court restrained the petitioner from utilizing any ITC until that date, balancing the interests of both parties involved.

This ruling serves as a crucial reminder of the need for transparency and fairness in administrative procedures. It reaffirms the principle that regulatory bodies must adhere to established protocols, ensuring that individuals have the opportunity to respond and contest actions that could significantly impact their business operations. As this case unfolds, it will be essential to monitor how the CGST Authority navigates the renewed proceedings in light of the court's guidance.