2025 (1) TMI 594 - HC - GST

Cancellation of petitioner s registration due to non-filing of GST returns for six months - petitioner was never put to any notice - violation of principles of natural justice - Applicability of doctrine of merger - HELD THAT - Admittedly the notice was given for cancellation of registration on the ground that the returns have not been filed continuously for six months; whereas the order of cancellation of registration has been passed on a different ground that comparison of return as per Rule 21-A(2-A) is not possible for which the petitioner was never put to any notice and therefore the order of cancellation of registration is in gross violation of principles of natural justice which cannot be sustained in the eyes of law. Further the appellate court has not passed the order on merit and therefore merger will not apply. Conclusion - The order of cancellation of registration is in gross violation of principles of natural justice which cannot be sustained in the eyes of law. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the cancellation of the petitioner's GST registration was valid given the grounds stated in the notice versus those in the cancellation order.
Whether the principles of natural justice were violated in the cancellation process, specifically concerning the lack of notice and opportunity to be heard.
Whether the appellate authority's dismissal of the appeal on grounds of limitation was appropriate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of GST Registration Cancellation

Relevant Legal Framework and Precedents: The cancellation of GST registration is governed by the GST Act and associated rules, particularly Rule 21-A(2-A). The precedents cited include judgments from Precitech Enginees and M/s Assaka Powerinfra Pvt. Ltd., which emphasize the necessity of adhering to the grounds stated in the show cause notice.
Court's Interpretation and Reasoning: The court noted that the cancellation was based on a ground different from that in the notice, which is a violation of procedural fairness. The notice cited non-filing of returns for six months, while the cancellation order was based on an inability to compare returns as per Rule 21-A(2-A).
Key Evidence and Findings: The court found that the petitioner had indeed filed the returns and paid the taxes with interest before the appeal, which was not considered by the appellate authority.
Application of Law to Facts: The court applied the principle that an order must adhere to the grounds specified in the notice, and any deviation constitutes a breach of natural justice.
Treatment of Competing Arguments: The respondent's argument supporting the cancellation was rejected due to the procedural irregularity and lack of adherence to the principles of natural justice.
Conclusions: The court concluded that the cancellation order was unsustainable as it was based on grounds not specified in the notice.

Issue 2: Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that affected parties receive notice and an opportunity to be heard. The court referenced its previous decisions in Precitech Enginees and M/s Assaka Powerinfra Pvt. Ltd., which highlight the necessity of these procedural safeguards.
Court's Interpretation and Reasoning: The court found that the petitioner was not given an adequate opportunity to respond to the grounds for cancellation, as the notice did not specify the actual reason for cancellation.
Key Evidence and Findings: The court observed that the notice was sent via email, which was not checked due to the partners' involvement in personal matters, leading to a lack of response.
Application of Law to Facts: The court applied the principle that procedural fairness must be maintained, and any deviation from this renders the administrative action void.
Treatment of Competing Arguments: The court dismissed the respondent's defense of the cancellation process, emphasizing the lack of procedural fairness.
Conclusions: The court held that the cancellation was in violation of natural justice principles and thus invalid.

Issue 3: Dismissal of Appeal on Limitation Grounds

Relevant Legal Framework and Precedents: The court considered the procedural aspects of filing an appeal and the implications of dismissing an appeal based on limitation without considering the merits.
Court's Interpretation and Reasoning: The court noted that the appellate authority failed to consider the merits of the case, focusing solely on the limitation period, which was inappropriate given the circumstances.
Key Evidence and Findings: The petitioner had filed the necessary returns and paid the taxes before the appeal, which should have been considered by the appellate authority.
Application of Law to Facts: The court applied the principle that an appeal should be considered on its merits, especially when the underlying procedural fairness is in question.
Treatment of Competing Arguments: The court rejected the respondent's argument that the appeal was rightly dismissed on limitation grounds, emphasizing the need for a merits-based review.
Conclusions: The court concluded that the dismissal of the appeal on limitation grounds was inappropriate, given the lack of a merits-based consideration.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The order of cancellation of registration is in gross violation of principles of natural justice, which cannot be sustained in the eyes of law."
Core Principles Established: The judgment reinforced the necessity of adhering to the grounds stated in the notice for cancellation and the importance of procedural fairness and natural justice in administrative actions.
Final Determinations on Each Issue: The court quashed the cancellation order, directing the restoration of the petitioner's registration, and emphasized the requirement for a merits-based review of appeals.

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