Suspension of GST registration resulting in highly adverse consequences – The blanket violation of the Principle of Natural Justice? – Plea admitted before Bombay HC

This amendment goes contrary to the principles of natural justice  under Article 14 & has a disproportionately drastic effect on the right to carry business under Article 19.

Suspension of GST registration leads to drastic consequences for the taxpayer in the form of prohibition on making taxable supplies, issuing tax invoices, filing returns, etc.

Undeniably, it is the steps not resulting in a some small penal consequences but is abruptly violation of the principles of natural justice.

Rule 21A(2), CGST Rules, 2017 initially had an element of the principles of natural justice inbuilt in the form of opportunity of being heard to the taxpayer prior to such suspension. However, vide an amendment in December, 2020, this requirement was deleted from Rule 21A(2).

This amendment goes contrary to the principles of natural justice  under Article 14 & has a disproportionately drastic effect on the right to carry business under Article 19.

 It remains a mystery as to how the department will have relevant material in the form of justifications – legal & factual before it to form reasons to believe prior to directing suspension.

In view of the above, a challenge to the vires of 2020 amendment is inevitable.

Recently, Bombay HC in the case of SAT Industries v UOI & Ors has entertained such a challenge.

The HC has issued notice on the plea & granted interim stay of the suspension order.

Let us wait and watch the outcome soon.