2025 (3) TMI 1331 - HC - GST

Cancellation of GST registration - respondents have failed to assign any valid reason justifying the action of cancellation - violation of principles of natural justice - HELD THAT - As is manifest from the original order of cancellation of registration as well as the order in terms of which the application for revocation has come to be rejected the respondents have failed to assign any valid reason justifying the action of cancellation. The orders are thus liable to be quashed and set aside on this short score alone. Additionally it is noted that the original order of cancelling the registration of writ petitioner was ordained to come into effect from a retrospective date of 03 August 2017. The original SCN did not bear any intent to cancel the registration of the petitioner with retrospective effect. Conclusion - The rejection of the revocation application without a hearing violated Section 30 of the CGST Act and principles of natural justice leading to the quashing of the order. The writ petition is allowed and the impugned SCN dated 02 February 2023 the order-in-appeal dated 04 October 2024 the original order for cancellation of registration dated 02 February 2023 as well as the order dated 14 May 2024 in terms of which the application for revocation has come to be rejected are hereby quashed and set aside.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

a. Whether the order for cancellation of GST registration dated 23 February 2024, issued with retrospective effect from 03 August 2017, was valid under Section 29(2) of the Central Goods and Services Tax Act, 2017 (CGST Act).

b. Whether the rejection of the application for revocation of cancellation dated 14 May 2024, without providing an opportunity for a hearing, violated the principles of natural justice and the proviso to Section 30 of the CGST Act.

c. Whether the Show Cause Notice (SCN) and subsequent orders were arbitrary, non-speaking, and contrary to settled judicial precedents.

2. ISSUE-WISE DETAILED ANALYSIS

a. Validity of Retrospective Cancellation of GST Registration

- Relevant Legal Framework and Precedents: Section 29(2) of the CGST Act allows for the cancellation of registration, including retrospectively, if certain conditions are met. The Court referenced its prior decisions in Riddhi Siddhi Enterprises and Ramesh Chander, emphasizing the need for a reasoned order when exercising this power.

- Court's Interpretation and Reasoning: The Court found that the retrospective cancellation lacked justification as the SCN did not indicate any intent for such cancellation. The absence of reasons in the cancellation order rendered it unsustainable.

- Key Evidence and Findings: The SCN only cited "Letter return undelivered" as a reason, which the Court deemed insufficient for retrospective cancellation.

- Application of Law to Facts: The Court applied the principles from previous judgments, highlighting the necessity for objective criteria and reasoning when cancelling registration retrospectively.

- Treatment of Competing Arguments: The Court dismissed the respondents' actions due to a lack of valid reasoning and failure to adhere to procedural requirements.

- Conclusions: The retrospective cancellation was quashed due to the absence of a reasoned and justified basis.

b. Rejection of Application for Revocation Without Hearing

- Relevant Legal Framework and Precedents: Section 30 of the CGST Act mandates an opportunity for hearing before rejecting an application for revocation of cancellation. The principles of natural justice require a fair hearing.

- Court's Interpretation and Reasoning: The Court noted the absence of a hearing opportunity before rejecting the revocation application, which violated statutory requirements and principles of natural justice.

- Key Evidence and Findings: The order of rejection cited non-reply to a notice as the sole ground, without considering the petitioner's right to be heard.

- Application of Law to Facts: The Court emphasized the necessity of providing a hearing, aligning with statutory provisions and judicial precedents.

- Treatment of Competing Arguments: The respondents' failure to provide a hearing was deemed a procedural flaw, rendering the rejection order unsustainable.

- Conclusions: The rejection of the revocation application was set aside due to procedural violations.

c. Arbitrariness and Non-Speaking Nature of Orders

- Relevant Legal Framework and Precedents: Judicial precedents require orders to be reasoned and not arbitrary, ensuring transparency and fairness in administrative actions.

- Court's Interpretation and Reasoning: The Court found the orders to be arbitrary and non-speaking, lacking necessary reasoning and justification.

- Key Evidence and Findings: The SCN and subsequent orders failed to provide cogent reasons for the actions taken, violating legal standards.

- Application of Law to Facts: The Court applied principles from prior judgments, emphasizing the need for reasoned orders to uphold fairness and legality.

- Treatment of Competing Arguments: The absence of reasons and arbitrary nature of the orders led to their invalidation by the Court.

- Conclusions: The arbitrary and non-speaking nature of the orders resulted in their quashing.

3. SIGNIFICANT HOLDINGS

- The Court held that the retrospective cancellation of GST registration was invalid due to the lack of justified reasoning, aligning with the principles established in Riddhi Siddhi Enterprises and Ramesh Chander.

- The rejection of the revocation application without a hearing violated Section 30 of the CGST Act and principles of natural justice, leading to the quashing of the order.

- The Court emphasized that administrative orders must be reasoned and not arbitrary, reaffirming the need for transparency and fairness in administrative actions.

- The impugned SCN, order-in-appeal, and cancellation orders were quashed and set aside, with the Court allowing the respondents to initiate fresh proceedings in compliance with legal standards.