2022 (9) TMI 1047 - HC - GST

GST registration cancelled for alleged six-month return non-filing-unreasoned order challenged; cancellation set aside under Article 14 non-arbitrariness

Cancellation of GST registration for alleged non-filing of returns for six continuous months was challenged on the ground that the cancellation order ... Cancellation of registration - non-application of mind - denial of reasoned order - Article 14 of the Constitution of India - fundamental right to carry on trade under Article 19 - power to condone delay under Section 107(4) of the GST Act - limitation bar on appeals - opportunity of hearing - fresh adjudication and compliance with Section 29 of the GST ActCancellation of registration - non-application of mind - denial of reasoned order - Article 14 of the Constitution of India - fundamental right to carry on trade under Article 19 - The order dated 13.02.2020 cancelling the petitioner's GST registration was vitiated for want of application of mind and absence of reasons and was set aside. - HELD THAT: - The cancellation order does not disclose any reasons or any application of mind. A quasi-judicial order affecting the petitioner's right to carry on business under Article 19 requires reasons; reasons are the heart and soul of a judicial or administrative order. In the absence of any reasons or consideration recorded in the impugned order, the order fails the test of Article 14 and cannot stand. Reliance placed on authorities to the effect that administrative/quasi-judicial orders must indicate reasons was noted. Consequently the cancellation order dated 13.02.2020 is set aside. [Paras 6, 7, 8]Impugned cancellation order dated 13.02.2020 set aside for want of application of mind and absence of reasons.Power to condone delay under Section 107(4) of the GST Act - limitation bar on appeals - The Appellate Authority's view that it has no power to condone delay under the statutory scheme and that the appeal was barred by limitation was not faulted. - HELD THAT: - The Appellate Authority dismissed the appeal as barred by the prescribed period of limitation and recorded that no statutory power to condone delay exists under Section 107(4) of the GST Act. The Court accepted that position and observed there was no infirmity in the appellate authority's conclusion that delay could not be condoned within the statutory framework. [Paras 5]Appellate order dismissing the appeal as time-barred (and declining to condone delay) sustained; no fault found with the Appellate Authority's view on the lack of power to condone delay.Opportunity of hearing - fresh adjudication and compliance with Section 29 of the GST Act - Proceedings were remitted to the Adjudicating Authority for fresh consideration after affording the petitioner an opportunity to reply and be heard; further action to follow the law including Section 29 of the GST Act. - HELD THAT: - Having set aside the cancellation order, the Court directed the petitioner to file a reply to the show-cause notice within three weeks. The Assistant Commissioner (Adjudicating Authority) was directed to afford hearing to the petitioner and to pass a fresh order after considering the defence raised. The Court further directed that subsequent action shall proceed in accordance with law as prescribed under Section 29 of the GST Act. [Paras 9, 10]Matter remitted to the Adjudicating Authority for fresh adjudication after giving opportunity of hearing and compliance with applicable provisions of the GST Act.Final Conclusion: The cancellation order dated 13.02.2020 is set aside for want of application of mind and absence of reasons; the appeal dismissed as time-barred by the Appellate Authority (which has no power to condone delay under the statutory scheme) was not faulted; the matter is remitted to the Adjudicating Authority to decide afresh after the petitioner files a reply and is afforded an opportunity of hearing, with further action to follow the provisions of the GST Act. Issues:Challenge to cancellation of registration under GST Act due to non-filing of returns, Appeal dismissal for delay condonation, Compliance with principles of natural justice in cancellation order.Analysis:1. Cancellation of Registration: The petitioner, a proprietorship concern registered under the GST Act, challenged the cancellation of registration due to non-filing of returns. The cancellation order dated 13.02.2020 lacked reasoning and application of mind, violating principles of natural justice. The petitioner argued that the cancellation adversely affected their right to conduct business, invoking constitutional guarantees under Article 19 and Article 14. The High Court set aside the cancellation order, emphasizing the necessity for reasons in administrative or quasi-judicial decisions, as established in precedents like Whirlpool Corporation v. Registrar of Trademarks.2. Dismissal of Appeal: The petitioner's appeal against the cancellation order was dismissed by the Appellate Authority due to delay beyond the prescribed period, citing Section 107(4) of the GST Act. The petitioner contended that the delay was due to unforeseen circumstances, including illness and the COVID-19 situation. While acknowledging the lack of power to condone the delay under the statutory scheme, the Court held that the dismissal of the appeal did not preclude challenging the cancellation order itself, as the latter lacked justification and application of mind.3. Compliance with Principles of Natural Justice: The Court emphasized the importance of providing reasons in administrative or quasi-judicial orders, as reiterated in the judgment of Om Prakash Mishra v. State of U.P. The lack of reasoning in the cancellation order dated 13.02.2020 led to its set aside, highlighting the need for adherence to Article 14 of the Constitution of India. The Court directed the petitioner to respond to the show-cause notice within three weeks, with the Adjudicating Authority instructed to issue a fresh order after affording the petitioner a hearing and considering their defense.4. Future Compliance: With the cancellation order set aside, the Court directed that further actions be taken in accordance with the law prescribed under Section 29 of the GST Act. This decision ensures that the petitioner's rights are protected, and due process is followed in any subsequent proceedings related to the registration cancellation issue.