Tax Registration Cancellation Overturned: Authority Must Provide Fair Hearing and Substantive Reasoning Before Imposing Penalties

HC allowed writ petition challenging tax registration cancellation. The court found the original order lacked proper reasoning and violated constitutional principles of fairness. HC set aside the cancellation order, directing the tax authority to conduct a fresh hearing and provide the petitioner an opportunity to present their defense within three weeks.

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Issues:
Challenge to cancellation of registration under the Uttar Pradesh Goods and Services Tax Act, 2017 based on lack of application of mind, violation of Article 19 and Article 14 of the Constitution of India, absence of reasons in the impugned order, and failure to provide opportunity for defense.

Analysis:
The petitioner filed a writ petition under Article 226 challenging the cancellation of registration dated June 10, 2022, and the subsequent appellate order dated July 27, 2023 under Section 107 of the Uttar Pradesh Goods and Services Tax Act, 2017. The petitioner contended that the cancellation order lacked proper application of mind, as evident from discrepancies in the order itself regarding the submission of a reply by the petitioner. The counsel relied on a Division Bench judgment emphasizing the necessity of reasons in judicial proceedings, citing that the cancellation order adversely affected the petitioner's right to conduct business under Article 19 of the Constitution of India. Additionally, it was argued that the cancellation order did not comply with the mandate of Article 14 of the Constitution. The counsel highlighted that the appellate order dismissing the appeal was not faulty due to the Appellate Authority's lack of power to condone delays, but the cancellation order lacked justification, violating the petitioner's rights. The petitioner also referenced a Supreme Court case and a judgment of the High Court stressing the importance of providing reasons in administrative or quasi-judicial orders.

The Court noted that the cancellation order dated January 7, 2023, lacked reasons and was passed without proper application of mind, thereby failing to meet the standards of Article 14 of the Constitution. Consequently, the Court set aside the impugned order and allowed the petition. However, the petitioner was directed to respond to the show-cause notice within three weeks for fresh adjudication. The Assistant Commissioner was instructed to conduct a new hearing and issue a fresh order considering the petitioner's defense. The Court referenced a coordinate Bench judgment to emphasize the significance of providing reasons in judicial proceedings.

Drawing parallels with a similar case, the Court found that the present matter warranted setting aside the original and appellate orders. Therefore, the order dated June 10, 2022, and the appellate order dated July 27, 2023 were quashed. The petitioner was granted three weeks to respond to the show-cause notice, and the adjudicating authority was directed to conduct a fresh hearing and issue a new order after affording the petitioner an opportunity to present their case. Ultimately, the writ petition was allowed based on the above directions.

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