GST registration cancellation order quashed for being non-speaking and violating natural justice principles
Gauhati HC quashed GST registration cancellation order dated 10.02.2021 for being non-speaking and passed without application of mind. Despite petitioner's failure to file returns for six months and non-response to show cause notice, the court held that adverse orders cannot be mere formalities and must provide clear reasons. The cancellation order violated prescribed procedures under FORM GST REG-19 and principles of natural justice. Court emphasized that even when assessee defaults, proper officer remains obligated to pass speaking orders with adequate reasoning. Petition was allowed and impugned order set aside.
The core legal issue in this case revolves around the cancellation of the petitioner's GST registration under the Central Goods and Services Tax (CGST) Act, 2017. The petitioner challenges the cancellation order on the grounds that it was arbitrary and lacked proper reasoning. The petitioner argues that the order was a non-speaking one, failing to provide specific reasons for the cancellation. The petitioner also contends that due to the COVID-19 pandemic, they were unable to respond to the Show Cause Notice in time, and the impugned order was passed without considering their circumstances.
The relevant legal framework includes Section 29(2)(c) of the CGST Act, which empowers an officer to cancel the GST registration if a registered person fails to furnish returns for a continuous period as prescribed. Rule 21(h) of the CGST Rules supports this by stating that registration is liable to be canceled if returns are not filed for six consecutive months. Rule 22 outlines the procedure for cancellation, requiring a Show Cause Notice in FORM GST REG-17 and an order in FORM GST REG-19 if the registration is to be canceled.
The Court interprets these provisions by emphasizing the need for a speaking order, which should clearly state the reasons for cancellation. The Court finds that the impugned order dated 10.02.2021 did not comply with this requirement, as it failed to provide any reasoning for the cancellation of the petitioner's GST registration. The Court also notes that the Show Cause Notice did not specify the months for which returns were not filed, further highlighting the lack of clarity and specificity in the proceedings.
The key evidence includes the Show Cause Notice dated 05.01.2021, which alleged non-filing of returns for six months, and the impugned order dated 10.02.2021, which canceled the registration without providing reasons. The petitioner claims they did not submit a reply or attend a personal hearing, contrary to what the order suggests. The Court observes that no counter-affidavit or instructions were filed by the respondents to rebut the petitioner's assertions.
The application of law to facts reveals that the cancellation order did not meet the statutory requirements of a speaking order, as mandated by the CGST Act and Rules. The Court underscores the importance of recording reasons for decisions, particularly when they have adverse consequences for the affected party. The absence of reasons in the cancellation order renders it arbitrary and unjust.
The Court addresses competing arguments by acknowledging the petitioner's delay in filing the writ petition but asserts that the statutory breaches in the cancellation order outweigh the delayed approach. The Court emphasizes that the vulnerability of the order due to lack of reasons is more significant than the delay in seeking redress.
In conclusion, the Court finds the impugned order dated 10.02.2021 to be non-compliant with statutory requirements and sets it aside. The matter is reverted to the stage of the Show Cause Notice, allowing the petitioner to respond or fulfill pending obligations within a specified timeframe. The Court grants the petitioner one month to either submit a reply or furnish pending returns and dues, after which the Proper Officer must proceed in accordance with the prescribed procedure.
Significant holdings include the Court's reiteration of the necessity for a speaking order in administrative decisions affecting rights. The Court establishes that failure to provide reasons constitutes a violation of natural justice and statutory prescriptions, rendering such orders invalid. The decision underscores the need for due process and fair play in administrative actions under the GST regime.
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