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2025 (3) TMI 1335 - HC - GSTCancellation 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 15.01.2023 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 15.01.2023 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.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Compliance with Statutory Provisions for Cancellation The relevant legal framework includes Section 29(2)(c) of the CGST Act, which allows cancellation of GST registration for failure to furnish returns for a continuous period as prescribed, and Rule 21(h) of the CGST Rules, which specifies the conditions under which registration can be cancelled. The Court observed that the cancellation process must adhere to the procedure outlined in Rule 22 of the CGST Rules, which includes issuing a show cause notice in FORM GST REG-17 and providing the registered person an opportunity to respond in FORM GST REG-18. The Court found that the cancellation order dated 24.02.2023 did not comply with these statutory requirements, as it lacked specific reasons for the cancellation, thereby failing to meet the criteria of a speaking order. 2. Requirement of a Speaking Order The Court emphasized the necessity of a speaking order, which should clearly state the reasons for the decision. The absence of reasons in the cancellation order indicated a lack of application of mind by the Proper Officer, rendering the order non-compliant with the legal standards. The Court noted that the order merely stated "Cancelled" without providing any justification or reference to the petitioner's specific circumstances, which is contrary to the principles of natural justice and fair procedure. 3. Opportunity to Respond and Procedural Fairness The petitioner argued that he was unable to respond to the show cause notice due to circumstances beyond his control, including the impact of COVID-19 on his business. The Court acknowledged that the show cause notice failed to specify the period of non-compliance, which is a procedural lapse. The Court concluded that the procedural fairness was compromised as the petitioner was not adequately informed of the specific allegations against him, and the Proper Officer did not fulfill the obligation to pass a reasoned order. 4. Delay in Filing the Writ Petition Despite the delay in filing the writ petition, the Court held that the fundamental flaw in the cancellation order, namely the lack of reasons, outweighed the delay. The Court prioritized the statutory requirement for a reasoned decision over the procedural delay in challenging the order. SIGNIFICANT HOLDINGS The Court set aside and quashed the cancellation order dated 24.02.2023, citing the absence of a speaking order as the primary reason. The Court reiterated the importance of recording reasons in administrative decisions, particularly those affecting the rights of individuals. The Court established the principle that any order with adverse civil consequences must comply with the statutory requirement of being a speaking order, reflecting conscious application of mind by the authority. The Court directed that the matter be reverted to the stage of issuance of the show cause notice, allowing the petitioner to respond or comply with the requirements to avoid cancellation. The Proper Officer was instructed to provide the petitioner with details of outstanding dues if requested, and to proceed with the decision-making process in accordance with the law. The Court granted the petitioner a period of one month to either respond to the show cause notice or fulfill the pending tax obligations, after which the Proper Officer is to conclude the process expediently. The writ petition was allowed to the extent indicated, with no order as to costs.
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