2025 (4) TMI 557 - HC - GST

Cancellation of the petitioner s GST registration under the Central Goods and Services Tax (CGST) Act 2017 - challenge on the ground that the 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 - Section 39 1 of the CGST Act inter-alia requires a registered person to furnish a return for every calendar month or part thereof electronically of inward and outward supplies of goods or services or both input tax credit availed tax payable tax paid and such other particulars in such form and manner and within such time as may be prescribed. Rule 61 1 of the CGST Rules has prescribed the Form and manner of furnishing of return electronically through the common portal either directly or through a notified Facilitation Centre as specified under sub-section 1 of Section 39 of the CGST Act. As per Section 29 2 c an officer duly empowered may cancel the GST registration of a person from such date including any retrospective date as he deems fit where any registered person has not furnished returns for such continuous tax period as may be prescribed. As per Rule 21 h of the CGST Rules registration granted to a person is liable to be cancelled if the said person being a registered person required to file returns under sub-section 1 of Section 39 of the CGST Act for each month or part thereof has not furnished returns for a continuous period of six months. 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 05.01.2021 or did not appear before the Proper Officer when she 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. The impugned Order dated 10.02.2021 is not a speaking order. As such the impugned Order dated 10.02.2021 is found to be one which is passed without any application of mind. For the afore-stated reasons the impugned Order dated 10.02.2021 cannot stand the scrutiny of law and is liable to be set aside and quashed. Conclusion - The failure to provide reasons constitutes a violation of natural justice and statutory prescriptions rendering such orders invalid. Petition allowed.

Summary

The core legal issue in this case revolves around the cancellation of the petitioner's GST registration under the Central Goods and Services Tax (CGST) Act, 2017. The petitioner challenges the cancellation order on the grounds that it was arbitrary and lacked proper reasoning. The petitioner argues that the order was a non-speaking one, failing to provide specific reasons for the cancellation. The petitioner also contends that due to the COVID-19 pandemic, they were unable to respond to the Show Cause Notice in time, and the impugned order was passed without considering their circumstances.

The relevant legal framework includes Section 29(2)(c) of the CGST Act, which empowers an officer to cancel the GST registration if a registered person fails to furnish returns for a continuous period as prescribed. Rule 21(h) of the CGST Rules supports this by stating that registration is liable to be canceled if returns are not filed for six consecutive months. Rule 22 outlines the procedure for cancellation, requiring a Show Cause Notice in FORM GST REG-17 and an order in FORM GST REG-19 if the registration is to be canceled.

The Court interprets these provisions by emphasizing the need for a speaking order, which should clearly state the reasons for cancellation. The Court finds that the impugned order dated 10.02.2021 did not comply with this requirement, as it failed to provide any reasoning for the cancellation of the petitioner's GST registration. The Court also notes that the Show Cause Notice did not specify the months for which returns were not filed, further highlighting the lack of clarity and specificity in the proceedings.

The key evidence includes the Show Cause Notice dated 05.01.2021, which alleged non-filing of returns for six months, and the impugned order dated 10.02.2021, which canceled the registration without providing reasons. The petitioner claims they did not submit a reply or attend a personal hearing, contrary to what the order suggests. The Court observes that no counter-affidavit or instructions were filed by the respondents to rebut the petitioner's assertions.

The application of law to facts reveals that the cancellation order did not meet the statutory requirements of a speaking order, as mandated by the CGST Act and Rules. The Court underscores the importance of recording reasons for decisions, particularly when they have adverse consequences for the affected party. The absence of reasons in the cancellation order renders it arbitrary and unjust.

The Court addresses competing arguments by acknowledging the petitioner's delay in filing the writ petition but asserts that the statutory breaches in the cancellation order outweigh the delayed approach. The Court emphasizes that the vulnerability of the order due to lack of reasons is more significant than the delay in seeking redress.

In conclusion, the Court finds the impugned order dated 10.02.2021 to be non-compliant with statutory requirements and sets it aside. The matter is reverted to the stage of the Show Cause Notice, allowing the petitioner to respond or fulfill pending obligations within a specified timeframe. The Court grants the petitioner one month to either submit a reply or furnish pending returns and dues, after which the Proper Officer must proceed in accordance with the prescribed procedure.

Significant holdings include the Court's reiteration of the necessity for a speaking order in administrative decisions affecting rights. The Court establishes that failure to provide reasons constitutes a violation of natural justice and statutory prescriptions, rendering such orders invalid. The decision underscores the need for due process and fair play in administrative actions under the GST regime.