GST cancellation orders can be issued beyond 30-day Rule 22(3) timeline as it's directory not mandatory

Delhi HC held that the 30-day timeline in Rule 22(3) of GST Rules for issuing cancellation orders is directory, not mandatory. The court reasoned that treating it as mandatory would create anomalous situations where taxpayers voluntarily seeking cancellation could be deemed rejected if officers fail to decide within 30 days. The expression "shall issue an order within 30 days" cannot be construed differently for proceedings under Rule 20 versus Rule 21. Authorities do not forfeit their right to pass orders after 30 days. The proper officer was directed to expeditiously decide the show cause notice within two weeks.

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Issues Involved:
1. Validity of the Show Cause Notice issued on 22.06.2023.
2. Whether the Show Cause Notice has lapsed under Rule 22(3) of the Central Goods and Service Tax Rules, 2017.
3. Interpretation of the mandatory or directory nature of the timeline in Rule 22(3).

Summary:

1. Validity of the Show Cause Notice issued on 22.06.2023:
The petitioner challenged the Show Cause Notice dated 22.06.2023, which suspended their GST registration due to "No business activity found in the premises, no documents and stock was available at business premises at the time of visit dated 16.06.2023. The premises is a residential floor and no additional place of business mentioned in the GST Registration."

2. Whether the Show Cause Notice has lapsed under Rule 22(3) of the Central Goods and Service Tax Rules, 2017:
The petitioner argued that the Show Cause Notice issued on 22.06.2023 had not been adjudicated and, as per Rule 22(3), it should be deemed to have lapsed. The respondent contended that a physical verification confirmed no business activity at the registered address, which was a residential premises.

3. Interpretation of the mandatory or directory nature of the timeline in Rule 22(3):
The court examined whether the expression "shall issue an order within a period of 30 days" in Rule 22(3) is mandatory or directory. The court referred to various judgments, including *Manickam v. Vasantha* and *May George v. Tahsildar*, to determine that the timeline is directory, not mandatory. The court concluded that the absence of a stipulation for automatic forfeiture of the right to pass an order implies that the condition is directory.

Conclusion:
The court held that the authorities have not lost the right to pass an order after the lapse of 30 days from the filing of the reply by the petitioner. The petition was disposed of with a direction to the Proper Officer to expeditiously pass an order on the Show Cause Notice within two weeks. The court clarified that it has not considered or commented on the merits of the contentions of either party, reserving all rights and contentions.

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