GST registration cancellation set aside due to contradictory order and lack of proper opportunity despite delayed returns

Gujarat HC set aside GST registration cancellation order dated 8.3.2022 for non-application of mind by authorities. Petitioner failed to file GST returns from August 2021 to January 2022 due to COVID-19 financial crisis. Court found contradictions in cancellation order which referenced petitioner's reply dated 6.3.2022 while simultaneously stating no reply was submitted. Additionally, effective cancellation date differed from show cause notice date. Despite petitioner not responding to show cause notice timely, court noted no personal hearing date was prescribed and petitioner adequately explained delay. Writ petition partly allowed, fresh opportunity granted to respond.

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Issues:
1. Quashing of show cause notice, cancellation of registration, and appeal rejection on the ground of limitation.

Analysis:
The petitioner, a manufacturing unit of M.S. Billets, faced financial crises due to the Covid-19 pandemic, leading to non-filing of GST returns from August 2021 to January 2022. Respondent No. 3 issued a show cause notice on 23.2.2022 for registration cancellation, effective from 1.8.2021, due to non-filing of returns. The petitioner did not respond, and the registration was canceled. The petitioner's belated appeal was rejected on 7.9.2022. The petitioner challenged these actions, citing procedural lapses and principles of natural justice. The respondent argued that the actions were legal due to the prolonged non-compliance period.

Regarding the show cause notice, the court found it deficient in specifying a personal hearing date, suspending registration without prior intimation, and lacking application of mind, violating natural justice principles. The cancellation order dated 8.3.2022 referenced a reply not submitted by the petitioner, indicating a lack of consideration. The effective date discrepancy and nil tax demand raised doubts on the order's validity. The appellate order's rejection based on limitation was deemed unfair as the petitioner was not given a chance to explain the delay. The court noted the petitioner's readiness for compliance and the respondent's failure to contest the financial crisis impact.

In light of the circumstances, the court allowed the petition partially, quashing the orders dated 8.3.2022 and 7.9.2022. The petitioner's registration was reinstated, and the matter was remanded for the petitioner to respond to the show cause notice within 15 days. The petitioner would receive a fair hearing, and the authority would issue a new order without bias. The court emphasized not delving into the case's merits, concluding the disposition without costs.

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