2023 (4) TMI 1393 - HC - GST

Cancellation of the petitioner s registration under the Goods and Services Tax (GST) regime - Non-speaking order - violation of rpinciples of natural justice - HELD THAT - Bihar Goods and Services Taxes Rules 2017 GST REG-19 has a specific column where reasons have to be assigned. However the Assessing Officer seems to be labouring under the belief that when an assessee does not appear or an objection is not filed no reasons have to be assigned. The said order cannot be countenanced especially when there is absolutely no reason stated regarding the cancellation of registration. Notification No. 3 of 2023 has been brought in by the Central Government on the recommendations of the G.S.T. Council wherein if the cancellation has been effected for failure to file returns under clause (b) or clause (c) of Sub-section (2) of Section 29 there is a further period allowed up to 30.06.2023 wherein the registered person can apply for invocation of cancellation. This is also subject to the condition that the return should be filed up to the effective date of cancellation of registration and the payment of tax interest penalty and late fee in respect of such returns have also been made. Conclusion - The cancellation order was set aside due to its non-speaking nature and violation of natural justice. The petitioner was granted the opportunity to seek remedy under the applicable notification. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

• Whether the cancellation of the petitioner's registration under the Goods and Services Tax (GST) regime was lawful.
• Whether the order for cancellation was a non-speaking order, and if so, whether it violated principles of natural justice.
• What remedies are available to the petitioner following the setting aside of the cancellation order?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Lawfulness of the Cancellation of GST Registration

• Relevant Legal Framework and Precedents:
  • The cancellation of GST registration is governed by the Bihar Goods and Services Taxes Rules, 2017, specifically involving the use of Form GST REG-19.
  • Precedent from a previous judgment in Manoj Kumar Sah versus The State of Bihar and Anr. highlighted the necessity for orders to be speaking and reasoned, especially when they entail civil and penal consequences.
• Court's Interpretation and Reasoning:
  • The court noted that the order at Annexure-2 did not provide any reasons for the cancellation of registration, nor did it refer to the subject of the notice, rendering it a non-speaking order.
• Key Evidence and Findings:
  • The court examined the order and found it lacking in reasons, which is a requirement under the GST framework.
• Application of Law to Facts:
  • The court applied the legal requirement for a speaking order to the facts, finding the cancellation order deficient and non-compliant with the rules.
• Treatment of Competing Arguments:
  • The State argued that the form GST REG-19 was properly adopted, but the court found this unpersuasive due to the lack of stated reasons in the cancellation order.
• Conclusions:
  • The court concluded that the cancellation order was unlawful due to its non-speaking nature and lack of reasoning.

Issue 2: Violation of Principles of Natural Justice

• Relevant Legal Framework and Precedents:
  • Principles of natural justice require that decisions affecting rights must be reasoned and provide the affected party an opportunity to be heard.
  • Reference to the judgment in Manoj Kumar Sah emphasized the need for orders to reference show cause notices and responses.
• Court's Interpretation and Reasoning:
  • The court found that the absence of reasons in the order violated natural justice principles, as the petitioner was not adequately informed of the grounds for cancellation.
• Key Evidence and Findings:
  • The court noted the absence of any reference to the show cause notice or the petitioner's response in the cancellation order.
• Application of Law to Facts:
  • The court applied natural justice principles, determining that the order's lack of reasoning rendered it void.
• Treatment of Competing Arguments:
  • The court dismissed the State's argument that reasons were unnecessary when an objection is not filed, emphasizing the need for transparency and accountability in administrative decisions.
• Conclusions:
  • The court concluded that the order violated natural justice principles and must be quashed.

Issue 3: Remedies Available to the Petitioner

• Relevant Legal Framework and Precedents:
  • Notification No. 3 of 2023 by the Central Government allows for the invocation of cancellation under certain conditions.
• Court's Interpretation and Reasoning:
  • The court recognized the petitioner's right to seek remedy under the new notification, provided the conditions are met.
• Key Evidence and Findings:
  • The court noted the notification's provision for a further period to apply for invocation of cancellation if returns are filed and dues are cleared.
• Application of Law to Facts:
  • The court directed reconsideration of the issue, allowing the petitioner to avail remedies under the notification.
• Treatment of Competing Arguments:
  • The court did not face substantial competing arguments on this issue, as the notification provides a clear path for remedy.
• Conclusions:
  • The court allowed the petitioner to seek remedy under the notification, subject to compliance with its conditions.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning:
  • "It cannot be disputed that with the passing of the said order, petitioner is liable to both civil and penal consequences. To say the least, the authority ought to have at least referred to the contents of the show cause and the response thereto, which was not done."
  • "Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences."
• Core Principles Established:
  • Administrative orders affecting rights must be speaking orders with clear reasoning.
  • Non-compliance with procedural requirements and principles of natural justice renders orders void.
• Final Determinations on Each Issue:
  • The cancellation order was set aside due to its non-speaking nature and violation of natural justice.
  • The petitioner was granted the opportunity to seek remedy under the applicable notification.