2025 (3) TMI 1333 - HC - GST

Cancellation of GST Registration under the Central Goods and Services Tax - it is contended that manner in which the GST Registration has been cancelled is arbitrary and the impugned Order of cancellation has been passed without due application of mind - violation of principles of natural justice - HELD THAT - On perusal of the impugned Order it is evidently clear that the impugned Order is not in conformity with the procedure prescribed in FORM GST REG-19. A speaking order is one which expressly states the reasons for the decision. In other words a speaking order speaks for itself by assigning the reasons behind the conclusion. If an order is passed without giving a reason by the concerned authority then the order is a non-speaking one. Non-speaking order is one which does not provide a clear reason for its decision. The fact that the petitioner-assessee did not submit any Reply to the Show Cause Notice dated 11.10.2023 or did not appear before the Proper Officer when he was called upon to do so does not absolve the Proper Officer from the obligation of passing a speaking order as any order which brings adverse consequence to a person cannot be a mere paper formality. A submission has been made that the writ petition has been preferred with delay as the petitioner has filed the writ petition in February 2025 that is after about one year from the order of cancellation of registration. Although the petitioner has not approached the Court immediately after the order of cancellation of registration this Court is of the considered view that when the extent of vulnerability of the order of cancellation of registration is due to not meeting the statutory prescription of recording reasons is pitted against the delayed approach the vulnerability of the order of cancellation of registration would far outweigh the delayed approach because of its likely adverse affect on a registered person like the petitioner. It is open for the petitioner-assessee to submit a Reply to the Show Cause Notice dated 11.10.2023 showing reason s as to why the GST Registration should not be cancelled in terms of sub-rule 2 of Rule 22 of the CGST Rules read with Section 29 2 c of the CGST Act. In the alternative the petitioner-assessee at the time of and/or instead of replying to the Show Cause Notice served under sub-rule 1 of Rule 22 of the CGST Rules can furnish all the pending returns and make full payment of the tax dues along with the applicable interest late fee and penalty if any. It is therefore observed that it would be open for the petitioner-assessee to avail either of the two options. Conclusion - The impugned cancellation order quashed due to its procedural deficiencies and lack of reasoning. The matterias reverted to the stage of issuance of the show cause notice allowing the petitioner to respond or comply with the requirements for revocation of cancellation. Petition allowed by way of remand.

Summary

The core legal issues considered in this judgment revolve around the cancellation of the petitioner's GST registration under the CGST Act, 2017. The primary questions include whether the cancellation of GST registration was conducted in accordance with the legal framework, whether the order of cancellation was a speaking order as required by law, and whether the procedural requirements under the CGST Rules were adhered to by the Proper Officer.

In addressing these issues, the Court examined the relevant legal framework, including Section 39 of the CGST Act, which mandates registered persons to furnish monthly returns, and Section 29(2)(c), which allows for cancellation of registration if returns are not filed for a continuous period of six months. Rule 21(h) and Rule 22 of the CGST Rules outline the procedure for cancellation, including the issuance of a show cause notice and the requirement for a speaking order.

The Court noted that the petitioner failed to submit returns for a continuous period of six months, prompting the issuance of a show cause notice. However, the petitioner claimed that she could not respond to the notice due to personal hardships and lack of familiarity with the online portal. Furthermore, the petitioner argued that the cancellation order was non-speaking and did not provide reasons for the decision, violating the requirements of Rule 22 and Form GST REG-19.

The Court found that the cancellation order indeed lacked the necessary reasoning, rendering it a non-speaking order. It emphasized that a speaking order must expressly state the reasons for the decision, ensuring transparency and adherence to the principles of natural justice. The absence of reasons in the cancellation order indicated a lack of application of mind by the Proper Officer and amounted to arbitrary action.

The Court also considered the procedural lapse in the issuance of the show cause notice, which failed to specify the period of non-compliance. This omission further undermined the validity of the cancellation order.

Significant holdings from the judgment include the reaffirmation of the necessity for speaking orders in administrative decisions affecting individuals' rights. The Court held that the cancellation order was invalid due to its non-speaking nature and procedural deficiencies. It quashed the order and directed the matter to be reverted to the stage of the show cause notice issuance.

The Court allowed the petitioner to submit a reply to the show cause notice or alternatively furnish all pending returns and settle outstanding dues. It granted a period of one month for the petitioner to choose between these options. The Proper Officer was instructed to provide details of any outstanding dues and to proceed in accordance with the prescribed procedure under the CGST Act and Rules.

The judgment underscores the importance of procedural fairness and reasoned decision-making in administrative actions, particularly those with significant consequences for individuals and businesses. The Court's decision to set aside the cancellation order highlights the judiciary's role in ensuring adherence to statutory requirements and protecting individuals from arbitrary administrative actions.