2025 (3) TMI 670 - HC - GST

Cancellation of the registrations under Central Goods and Service Tax Act 2017 and State Goods and Service Tax Act 2017 - whether this Court should exercise its jurisdiction under Article 226 of the Constitution to interfere with the orders of cancellation of the registration? - HELD THAT - The combine reading of Sections 22 24 25 and 122 of the Central Act is that the person who is categorized in Sections 22 and 24 is compulsorily liable to be registered in the manner stipulated in Section 25 of the Central Act. It is further seen that if a person is not registered the Proper Officer can suo moto register him by following the mandate of Rule 16 of the Central Rules. Additionally Section 122 imposes penalty if a person fails to obtain registration. From a conjoint reading of Section 29 with Rule 22 and the FORMS GST REG-17 GST REG-18 GST REG-19 and GST REG-20 would show that the Proper Officer can cancel the registration under Sub-Section (2) of Section 29 only on the grounds stipulated in Sub-Clauses (a) to (e) of Section 29(2) and before doing so an opportunity of hearing has to be given to the person. Sub-Section (3) of Section 29 further stipulates that till the date of cancellation of the registration the person in whose favour the registration was has to pay tax and other dues under the Act or to discharge any obligations under the Act or the Rules made thereunder. It would also transpire from a reading of Rule 22 of the Central Rules that not only show cause notice is required to be issued in the format as stipulated in FORM GST REG-17 but also a date of hearing is required to be fixed. Therefore it would be seen that the opportunity which is to be granted has to be an opportunity in real sense and not a mere formality. Section 30 provides an avenue to the person whose registration has been cancelled to seek revocation of the cancellation of registration in the prescribed manner within 30 days from the date of service of the cancellation order. This was the position prior to 01.10.2023 but subsequently with effect from 01.10.2023 the person whose registration is cancelled may apply to such officer for revocation of the cancellation of registration in such manner within such time and subject to such conditions and restrictions as may be prescribed. In the instant batch of writ petitions there was no application filed for revocation in view of the mandate of Rule 23 as it stood post 01.10.2023 whereby it has been mandated that the period within which such an application can be filed cannot be filed beyond 270 days. Under such circumstances the avenue of revocation of the cancellation of the registration certificate was not available to the petitioners in the batch of writ petitions as no steps were taken within the period of 270 days. This Court has also perused the orders of cancellation impugned in the present proceedings. It is also relevant to take note of that admittedly the petitioners have not submitted any reply but most surprisingly the Proper Officer referred in the impugned orders of cancellation of the registration about replies being filed - It is trite principle of law that when a jurisdiction is conferred upon the Authority with a specific mandate how the jurisdiction is to be exercised and if the authority fails to exercise his jurisdiction as per the stipulated mandate it is to be deemed that the said Authority had not exercised the jurisdiction at all. This Court had in the previous segments of the instant judgment referred to the third proviso to Rule 23 (1) of the Central Rules which categorically stipulates that upon revocation of the cancellation of registration the assessee is required to file his returns within 30 days for the period from the date of cancellation to the date of revocation of the cancellation. In view of this Court opinioning that the orders of cancellation of registration are required to be interfered with the petitioners herein would now be required to file their annual returns for the various financial years till date - it is the opinion of this Court that in order to balance the equities it is required that the date of furnishing the annual return be appropriately extended. In that view of the matter this Court declares that in respect to the Petitioners in the present batch of writ petitions the period for submission of the annual returns would be the date of the instant judgment except for the period 2024-2025 which would be in terms with Section 44 of the Central Act/State Act. Conclusion - It is trite that if the said show cause notice is vague the very initiation of the proceedings on the basis of the said show cause notice would become redundant.The order of cancellation of registration is set aside subject to fulfilment of conditions imposed. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue considered in this judgment is whether the High Court should interfere with the cancellation of GST registrations under the Central Goods and Services Tax Act, 2017, and the State Goods and Services Tax Act, 2017, and potentially revoke these cancellations based on the facts presented in the batch of writ petitions.

2. ISSUE-WISE DETAILED ANALYSIS

The core issues revolve around the procedural and substantive correctness of the cancellation of GST registrations. The analysis involves the following elements:

Legal Framework and Precedents:

The relevant legal framework includes Sections 22, 24, 25, 29, and 30 of the Central Goods and Services Tax Act, 2017, and corresponding provisions in the State Act. These sections outline the conditions for registration, cancellation, and revocation of GST registration. Rule 22 of the Central Goods and Service Tax Rules, 2017, is also pertinent, detailing the procedure for cancellation.

Court's Interpretation and Reasoning:

The Court examined whether the procedural requirements for issuing show cause notices and cancellation orders were followed. It emphasized the necessity of a clear, specific, and legally sufficient show cause notice, as required by FORM GST REG-17, and the opportunity for a hearing before cancellation, as mandated by Section 29 and Rule 22.

Key Evidence and Findings:

The Court found that the show cause notices issued were vague and did not specify the reasons for cancellation or the period of non-compliance. Additionally, the cancellation orders contained contradictory statements regarding the submission of replies by the petitioners.

Application of Law to Facts:

The Court applied the statutory requirements to the facts, determining that the procedural lapses, including vague notices and contradictory orders, rendered the cancellations legally unsustainable.

Treatment of Competing Arguments:

The respondents argued that the cancellations were justified due to non-compliance with return filing requirements. However, the Court found that procedural deficiencies, such as the lack of specific reasons in show cause notices and the mechanical issuance of cancellation orders, outweighed the respondents' arguments.

Conclusions:

The Court concluded that the procedural defects in the cancellation process warranted setting aside the cancellation orders. It emphasized the importance of adhering to statutory procedures to ensure fairness and due process.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"It is trite that if the said show cause notice is vague, the very initiation of the proceedings on the basis of the said show cause notice would become redundant."

Core Principles Established:

The judgment reinforces the principle that procedural compliance is essential in administrative actions, particularly concerning the cancellation of statutory registrations. It underscores the requirement for specific, clear, and legally sufficient show cause notices and the opportunity for a fair hearing.

Final Determinations on Each Issue:

The Court set aside the cancellation orders for all petitioners, directing them to file their returns from the date of cancellation to the present within 30 days of the judgment. The Court extended the period for submission of annual returns to the date of the judgment, except for the financial year 2024-25, which remains subject to the statutory timeline.