2022 (12) TMI 813 - HC - GST

Cancellation of GST registration of petitioner - time limitation - Non-application of mind - HELD THAT - It is noticed that it is not in dispute that the petitioner could not file its returns under GST Act, for the period from August, 2021 to January, 2022 because of the financial crisis faced in the business, on account of Covid-19 Pandemic. The respondent no. 2 has in its affidavit-in-reply not controverted this aspect. In respect of order dated 8.3.2022, though the petitioner had not filed any reply to the show-cause notice within the time given, despite that the order of cancellation of registration dated 8.3.2022, refers to the reply of the petitioner dated 6.3.2022, which in our opinion shows non-application of mind by the authority. The authority has self-contradicted themselves by initially giving reference to reply dated 6.3.2022 and immediately in the next line stating that no reply to the show cause notice has been submitted. Moreover, in the order the date of cancellation of registration is made effective from 1.8.2021 as opposed to 23.2.2022 mentioned in the show cause notice. Therefore, we are of the opinion that the order dated 8.3.2022 is also issued without due application of mind. In respect of order dated 7.9.2022, admittedly the appeal could not be heard on merits as the same was rejected on the ground of limitation. Therefore, though we are conscious that opportunity inspite of being provided in the show cause notice dated 23.2.2022 was not availed of by the petitioner, at no stage can it be said that the petitioner was heard to explain the delay in filing returns. The reason for not being able to reply to the show cause notice in time has been sufficiently explained by the petitioner, which has not been controverted by the respondent in their affidavit-in-reply. Additionally, though the show cause notice dated 23.2.2022 talks about personal hearing on an appointed date, no such date was also prescribed, thereby providing no avenue to the petitioner to present its case. Thus, it would serve the ends of justice in the event the petitioner is provided a fresh opportunity to respond to the show cause notice. Resultantly, the writ petition deserves to be allowed and is accordingly partly allowed.

Summary

Issues:
1. Quashing of show cause notice, cancellation of registration, and appeal rejection on the ground of limitation.

Analysis:
The petitioner, a manufacturing unit of M.S. Billets, faced financial crises due to the Covid-19 pandemic, leading to non-filing of GST returns from August 2021 to January 2022. Respondent No. 3 issued a show cause notice on 23.2.2022 for registration cancellation, effective from 1.8.2021, due to non-filing of returns. The petitioner did not respond, and the registration was canceled. The petitioner's belated appeal was rejected on 7.9.2022. The petitioner challenged these actions, citing procedural lapses and principles of natural justice. The respondent argued that the actions were legal due to the prolonged non-compliance period.

Regarding the show cause notice, the court found it deficient in specifying a personal hearing date, suspending registration without prior intimation, and lacking application of mind, violating natural justice principles. The cancellation order dated 8.3.2022 referenced a reply not submitted by the petitioner, indicating a lack of consideration. The effective date discrepancy and nil tax demand raised doubts on the order's validity. The appellate order's rejection based on limitation was deemed unfair as the petitioner was not given a chance to explain the delay. The court noted the petitioner's readiness for compliance and the respondent's failure to contest the financial crisis impact.

In light of the circumstances, the court allowed the petition partially, quashing the orders dated 8.3.2022 and 7.9.2022. The petitioner's registration was reinstated, and the matter was remanded for the petitioner to respond to the show cause notice within 15 days. The petitioner would receive a fair hearing, and the authority would issue a new order without bias. The court emphasized not delving into the case's merits, concluding the disposition without costs.