HC sets aside GST cancellation order for non-application of mind, remands for fresh consideration under natural justice rules

The HC rejected the respondents' appeal based on limitation but found the cancellation of GST registration flawed due to non-application of mind and violation of natural justice principles, as the petitioner's reply was not considered. The cancellation order dated 12.09.2022 was held to be non-speaking and defective. The HC set aside the impugned orders and remanded the matter to the Superintendent to reconsider the petitioner's contentions afresh, directing completion of proceedings within three months. The petition was allowed by way of remand.

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ISSUES:

Whether an order for cancellation of GST registration passed under Section 29 of the CGST Act, 2017 without consideration of the petitioner's reply to the show cause notice is valid.Whether the rejection of an appeal on the ground of limitation is sustainable when the original cancellation order is not a speaking order.Whether the statutory/quasi-judicial authority is required to record reasons while passing an order affecting a party's rights.Whether the appellate authority's reliance on precedent dismissing belated appeals applies when the original order suffers from non-application of mind.Whether the matter should be remanded for fresh consideration after due application of mind and consideration of petitioner's contentions.

RULINGS / HOLDINGS:

The order for cancellation of GST registration passed under Section 29 of the CGST Act, 2017 is invalid as there is "total non-application of mind" and "no iota of consideration" of the petitioner's reply to the show cause notice.The rejection of the appeal on limitation grounds is unsustainable because the original cancellation order is not a "speaking order" and thus the appeal cannot be properly adjudicated.A quasi-judicial authority "must record reasons in support of its conclusions" and failure to do so violates the principles of natural justice and fairness in decision-making.The precedent relied upon by respondents dismissing belated appeals does not apply where the original order suffers from fundamental defects such as non-consideration of the petitioner's reply.The impugned orders are set aside and the matter is remanded to the original authority to proceed afresh with due consideration of all contentions within a stipulated period.

RATIONALE:

The Court applied the principles laid down by the Supreme Court in ORYX Fisheries Private Limited, emphasizing that judicial and quasi-judicial authorities must provide "cogent, clear and succinct" reasons to ensure transparency, accountability, and fairness.The statutory provision under Section 29 of the CGST Act, 2017 empowers cancellation of registration but such exercise is a "quasi judicial function" requiring adherence to principles of natural justice, including consideration of replies to show cause notices.The Court underscored the "doctrine of fairness in decision-making" and the necessity that decisions "must not only be done it must also appear to be done," referencing established common law and Strasbourg jurisprudence on reasoned decisions.The Court distinguished the present case from the precedent dismissing belated appeals, holding that where the original order is not reasoned, the appeal process itself is compromised.The remand for fresh consideration reflects the Court's insistence on procedural propriety and compliance with statutory safeguards before cancellation of registration is confirmed.

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