GST registration cancellation without notice or hearing violates Section 29(2) requirements for proper officer procedures

Kerala HC allowed the writ petition challenging cancellation of GST registration. The petitioner was not given notice or hearing opportunity before the cancellation order. The court held that under Section 29(2) of GST Act, the proper officer must provide hearing opportunity before cancelling registration. When there is change of officer, the succeeding officer must inform the assessee about continuation of proceedings to enable them to demand re-hearing. The court distinguished this from income tax cases, emphasizing that GST Act's use of "proper officer" creates stronger obligation to provide notice and hearing opportunity to the registrant before cancellation.

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ISSUES PRESENTED AND CONSIDERED

1. Whether cancellation of GST registration under Section 29(2) can be validly made by a succeeding "proper officer" without giving the registered person an opportunity of being heard.

2. Whether the proviso to Section 29(2) (that "the proper officer shall not cancel the registration without giving the person an opportunity of being heard") requires the succeeding officer to put the assessee on notice and afford an opportunity to be heard when continuing or concluding proceedings initiated by a predecessor officer.

3. Whether the absence of a Document Identification Number (DIN) on an order issued after the relevant circular (requiring DIN) renders the cancellation order invalid (raised but not expressly decided on the merits in the judgment).

4. Whether filing of defaulted returns after issuance of cancellation order affects the validity of the cancellation or requires treating the registration as not cancelled.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Requirement of opportunity to be heard before cancellation under Section 29(2)

Legal framework: Section 29(2) of the GST Act empowers the "proper officer" to cancel registration from such date as he may deem fit for specified defaults, and contains a proviso: "Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard." The clause uses discretionary language ("may cancel") and expressly conditions cancellation on opportunity of hearing.

Precedent treatment: Authorities under income-tax and wealth-tax statutes (decisions considering statutory provisions requiring opportunity of hearing and successor officers continuing proceedings) have held that where proceedings are continued by a succeeding officer, the assessee must be put on notice and afforded an opportunity to demand re-opening or rehearing; the succeeding officer should inform the assessee of the proposal to continue or conclude proceedings.

Interpretation and reasoning: The Court interprets the proviso to Section 29(2) as an embargo on the officer's power to cancel without giving the person an opportunity of being heard. The use of the term "proper officer" strengthens the implication that the officer who actually passes the cancellation order must satisfy himself by affording the opportunity. Where there is a change of officer, the succeeding officer cannot mechanically adopt the show-cause and pass an order of cancellation without putting the registered person on notice of the successor's intention and giving an opportunity to be heard.

Ratio vs. Obiter: Ratio - where cancellation under Section 29(2) is effected by a succeeding proper officer, the proviso requires the succeeding officer to give the registered person an opportunity of being heard before passing the cancellation order; failure to do so renders the order liable to be quashed. (This is the central holding applied to the facts.)

Conclusions: The impugned cancellation was invalid because the officer who issued the order did not afford any opportunity to the petitioner; therefore the cancellation order must be quashed and the registration treated as not cancelled where subsequent compliance (filing of returns) has been made.

Issue 2 - Duty of the succeeding officer to notify and hear the assessee when proceedings are continued

Legal framework: Comparative provisions and decisions under the Income-tax and Wealth-tax Acts recognize a statutory or inherent duty on a succeeding authority to inform the assessee and to afford an opportunity to demand reopening or rehearing where proceedings are to be continued from the stage left by the predecessor.

Precedent treatment: Earlier decisions (including Division Bench and Full Bench authorities) were followed and approved insofar as they require the succeeding officer to intimate the assessee of the intention to continue proceedings and to provide an opportunity to seek re-hearing or re-opening.

Interpretation and reasoning: By analogy and by construing the phrase "proper officer" in Section 29(2), the Court holds that the succeeding officer must put the registered person on notice and afford an opportunity of hearing prior to cancellation. This is necessary for the effective exercise of the officer's discretion to cancel or not cancel registration and to meet the safeguard embodied in the proviso.

Ratio vs. Obiter: Ratio - the succeeding proper officer must notify and hear the registered person before exercising the power of cancellation under Section 29(2) if the proceedings were initiated by a predecessor and continue before the successor.

Conclusions: Succeeding officers cannot issue cancellation orders without issuing a fresh or continuing notice and giving an opportunity of hearing; the absence of such notice/hearing vitiates the cancellation.

Issue 3 - Validity of order lacking Document Identification Number (DIN)

Legal framework: A departmental circular required orders issued from a stated date to contain a DIN. The petitioner relied on absence of DIN in the cancellation order as a ground of invalidity.

Precedent treatment: The judgment records the contention and the circular but does not undertake an extended analysis or expressly decide the legal effect of absence of DIN on validity in the operative ratio.

Interpretation and reasoning: The Court focused on the constitutional/statutory requirement of opportunity to be heard under Section 29(2) and the failure to afford such opportunity by the issuing officer. The DIN contention was raised but not determinatively adjudicated as a standalone ground for quashing.

Ratio vs. Obiter: Obiter - the observation that Ext.P2 lacked a DIN is recorded as a contention, but no definitive holding on invalidity for absence of DIN is made as part of the core ratio.

Conclusions: The decision to quash the cancellation rests on failure to afford hearing rather than on the absence of DIN; the DIN issue remains unadjudicated as a necessary basis for relief in this judgment.

Issue 4 - Effect of subsequent filing of defaulted returns on cancellation validity and relief

Legal framework: Section 29(2) lists non-filing of returns as grounds for cancellation; statutory scheme contemplates cancellation for specified defaults but contains proviso requiring opportunity of hearing.

Precedent treatment: No specific precedent was needed beyond principles regarding procedural fairness and the requirement of hearing prior to adverse administrative action.

Interpretation and reasoning: The Court notes that the petitioner had filed the defaulted returns (up to a specified date) after the cancellation. Because the cancellation order was quashed for want of hearing, and given the subsequent compliance, the Court directed that necessary orders be issued treating the registration as not cancelled.

Ratio vs. Obiter: Ratio - where cancellation is quashed for failure to afford hearing and the assessee has since regularised returns, appropriate orders should be issued treating the registration as not cancelled to give effect to the relief.

Conclusions: The impugned cancellation is quashed and respondents are directed to issue necessary orders treating the registration as not cancelled in light of the petitioner's filing of defaulted returns.

Relief and disposition

Because the officer who issued the cancellation did not afford an opportunity of being heard as required by the proviso to Section 29(2), the cancellation order is quashed; consequent administrative steps shall follow to treat the registration as not cancelled in view of the petitioner's subsequent compliance by filing returns.

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