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2022 (12) TMI 854 - HC - GST


Issues Involved:
1. Cancellation of GST registration.
2. Rejection of the appeal due to being time-barred.
3. Financial difficulties faced by the petitioner.
4. Non-filing of GSTR-3B returns.
5. Violation of principles of natural justice.

Detailed Analysis:

1. Cancellation of GST registration:
The petitioner, a registered partnership firm, faced cancellation of its GST registration (No. 24AACRF0752L1Z9) due to non-filing of returns for a continuous period of six months. The cancellation was initiated by a show cause notice issued on 15.11.2021 and formalized on 9.12.2021. The petitioner contended that the order was cryptic and lacked specific details regarding the amount payable, thus violating principles of natural justice.

2. Rejection of the appeal due to being time-barred:
The petitioner's appeal against the cancellation order was rejected by the first Appellate Authority (respondent No. 3) on 22.8.2022, citing it as time-barred. The petitioner filed the appeal almost eight months after the cancellation, which the respondents argued showed laxity and no equity in favor of the petitioner.

3. Financial difficulties faced by the petitioner:
The petitioner argued that severe financial difficulties, exacerbated by the Covid-19 pandemic and internal family disputes, hindered their ability to discharge tax liabilities on time. The petitioner highlighted the death of a partner and subsequent financial obligations amounting to Rs. 8 crores, which disrupted business operations and funds.

4. Non-filing of GSTR-3B returns:
The petitioner admitted to not filing GSTR-3B returns since February 2021 but had filed GSTR-1 for the same period, indicating awareness of GST liabilities. Despite efforts to arrange funds and partial payments amounting to Rs. 5,24,47,777/-, the petitioner failed to meet the requirements, leading to the cancellation of registration.

5. Violation of principles of natural justice:
The Court emphasized the importance of adhering to principles of natural justice, citing the case of Aggarwal Dyeing and Printing Works v. State of Gujarat. The show cause notice and cancellation order lacked detailed reasoning and specific amounts, which the Court found to be in gross violation of natural justice. The Court reiterated that reasons are the "heart and soul" of any order, and their absence renders the order indefensible and unsustainable.

Court's Decision:
The Court quashed the show cause notice and the cancellation order, citing a breach of natural justice. It directed the respondents to issue a fresh notice with detailed reasons and provide the petitioner a reasonable opportunity to respond. The Court refrained from imposing costs, based on the assurance from the respondent's counsel that such cryptic orders would not be repeated in the future.

Conclusion:
The petition was allowed on the grounds of violation of principles of natural justice. The respondents were instructed to follow due process in future cases, ensuring detailed reasons and fair hearing opportunities are provided to affected parties.

 

 

 

 

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