(1) If it appears that a certificate of title has been improperly issued, the department shall, after notice and hearing, cancel the certificate. The notice shall be served in person or by first class mail to the person to whom that certificate of title was issued, as well as any lienholders appearing thereon. The holder of the certificate of title shall return it to the department upon cancellation, but the cancellation of any certificate of title shall not affect the validity of any lien recorded on it.
(2) If a receipt of registration has been issued to the holder of a canceled certificate of title, the department shall immediately cancel it and demand the return of the receipt of registration and license plates, and the holder of the receipt of registration and license plates shall immediately return them to the department.