Arbitrary GST Registration Cancellation Struck Down: Authorities Must Provide Clear, Reasoned Justification for Administrative Actions

HC of Patna ruled on GST registration cancellation, finding the order invalid due to lack of reasoning. The court determined that cancellation orders must provide explicit justification and adhere to principles of natural justice. The writ petition was allowed, with the original order set aside and directed for reconsideration, noting the government's subsequent notification providing remedial options for registered persons.

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Issues:
The cancellation of registration without providing reasons and the legality of the order under Bihar Goods and Services Tax Act.

The High Court of Patna addressed the issue of cancellation of registration by Annexure-2 order dated 22.04.2022, which was delayed and subsequently rejected. The Court noted the absence of a Tribunal constituted for the State under the Bihar Goods and Services Tax Act.

Upon reviewing the order at Annexure-2, the Court observed that it lacked reasoning for the cancellation and did not specify the subject of the notice. The Court highlighted the form GST REG-19, emphasizing the necessity for reasons to be assigned in the cancellation order.

The Court found that the Assessing Officer erroneously believed that reasons need not be assigned when an assessee does not appear or file an objection. This misconception was deemed unacceptable by the Court, especially when no reasons were stated for the cancellation of registration.

Citing a previous judgment, the Court emphasized the importance of natural justice and the need for cancellation orders to be explicit and non-cryptic. The Court concluded that the impugned order suffered from similar deficiencies and directed the reconsideration of the issue.

Furthermore, the Court noted the introduction of notification No. 3 of 2023 by the Central Government, allowing a period until 30.06.2023 for registered persons to apply for cancellation invocation under specific conditions. This remedy was applicable if cancellation was due to failure to file returns under certain clauses of Section 29.

In light of the above, the Court allowed the writ petition, setting aside the Annexure-2 order and mandating a reevaluation of the cancellation issue.

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