2025 (9) TMI 49 - HC - GST

GST registration cancellation remanded for lack of application of mind; adjudicating authority to issue fresh reasoned notice

M/s Ngr Industries Versus Joint Commissioner Cgst And Another

HC found the cancellation order of the petitioner's GST registration lacked application of mind and failed the Article 14 test, and accordingly remanded ... Cancellation of GST registration of petitioner - contravention of conditions mentioned under Section 29 of GST Act - HELD THAT:- This Court in the case of M/s Pragya Publicity Centre [2025 (6) TMI 920 - ALLAHABAD HIGH COURT] has held that 'The record shows that the impugned order has been passed without application of mind and same does not satisfy the test of Article 14 of the Constitution of India.' The matter is remanded to the adjudicating authority, who shall issue fresh notice to the petitioner mentioning the reason of the proposed cancellation of registration within a period of one week from the date of production of certified copy of this order - Petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether cancellation of GST registration is sustainable when the cancellation order does not assign any reasons or disclose application of mind. 2. Whether an appeal dismissed as barred by limitation (laches) and not decided on merits precludes judicial review of an antecedent quasi-judicial order of cancellation that lacks reasons. 3. What relief is appropriate where a registration-cancelling order is found to be without reasons - specifically, whether remand for fresh notice/decision and opportunity to reply is required and on what terms. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of cancellation order lacking reasons Legal framework: Administrative/quasi-judicial orders affecting the right to carry on business attract requirements of reasoned decision-making under the governing statute and the mandates of Article 14 and Article 19 of the Constitution; cancellation of GST registration is governed by statutory provisions (referenced as Section 29 of the Act) and must satisfy principles of fair procedure and reasoned application of mind. Precedent treatment: The Court relied on earlier decisions of the same Court holding that an order cancelling registration without assignment of reasons is vulnerable (citing a series of bench decisions that set aside such orders and remanded for de novo consideration). The judgment also invokes appellate authority recognising that decisions affecting business rights must contain reasons to satisfy Article 14/19 requirements. Interpretation and reasoning: The Court examined the impugned order and found it devoid of any reasons and passed without application of mind; such absence of reasoning means the order cannot be said to comply with the statutory intent or constitutional mandates of reasoned administrative action. The Court treated the absence of reasons as a substantive infirmity that undermines the legality of the cancellation. Ratio vs. Obiter: Ratio - An order cancelling registration that contains no reasons and demonstrates no application of mind is unsustainable and liable to be set aside. Obiter - General observations about the statutory scheme (Section 29) as the source for cancellation power, insofar as not strictly dissected on facts, are ancillary. Conclusion: The cancellation order was quashed for lack of reasons and failure to apply mind; such orders do not satisfy Article 14/19 standards and cannot be sustained. Issue 2 - Effect of appeal dismissal on grounds of laches (doctrine of merger / finality) Legal framework: Principles governing limitation, condonation of delay in statutory appeals, and the doctrine of merger (i.e., whether dismissal of an appeal on limitation extinguishes or merges challenges to the original order) interact with supervisory writ jurisdiction when a fundamental procedural defect (absence of reasons) exists in the original order. Precedent treatment: The Court reviewed two strands of authority: (a) decisions holding that courts cannot condone delay in filing statutory appeals beyond prescribed limits; and (b) decisions of this Court and higher authorities holding that where an original order affecting fundamental rights is passed without reasons, dismissal of appeal on limitation does not bar judicial review or application of the doctrine of merger. The latter line was followed and applied; the former was held not to assist respondents because of the primary defect in the original order. Interpretation and reasoning: The Court reasoned that dismissal of the appeal for laches does not validate an antecedent order that is devoid of reasons. Where an order affecting the right to do business lacks any rationale, the doctrine of merger will not be permitted to operate to foreclose examination of the original infirmity. The Court distinguished authority relied upon by respondents (that delay cannot be condoned) on the ground that those decisions did not involve orders without reasons; thus they do not negate the principle that absence of reasons permits fresh adjudication notwithstanding appellate dismissal on limitation grounds. Ratio vs. Obiter: Ratio - An appeal dismissed as barred by limitation does not preclude judicial interference with an original cancellation order which is wholly without reasons; the doctrine of merger will not apply to validate such an order. Obiter - Observations on other authorities about inability to condone delay are explanatory and were not applied to defeat relief here. Conclusion: The appellate dismissal for laches did not preclude quashing the cancellation order which lacked reasons; the matter required de novo consideration. Issue 3 - Appropriate remedial measures when cancellation order is quashed Legal framework: Principles of judicial review, natural justice and statutory adjudicatory procedure require that where an order is set aside for procedural or substantive defects, the authority should be directed to proceed afresh, providing notice of grounds, opportunity to reply and a reasoned, speaking order within a specified timeframe. Precedent treatment: The Court followed precedents directing remand for fresh adjudication where orders without reasons were set aside and parties were permitted to file responses to show cause notices; those precedents mandated a structured remedial process rather than immediate reinstatement or monetary relief. Interpretation and reasoning: Given the absence of reasons in the impugned cancellation, the Court held that the proper course is to remand to the adjudicating authority to issue a fresh notice specifying reasons for proposed cancellation, allow the affected party time to reply, and thereafter pass a reasoned and speaking order after affording hearing. Timelines were prescribed to ensure expedition and fairness (fresh notice within one week of certified copy production, 21 days to reply, and two weeks for a reasoned order thereafter). Ratio vs. Obiter: Ratio - Where a cancellation order is quashed for lack of reasons, the appropriate remedy is remand with directions for issuance of a fresh notice specifying reasons, an opportunity to reply, and a requirement that the authority pass a reasoned, speaking order within a short, specified timeline. Obiter - Specific timelines prescribed by the Court are pragmatic directions tailored to the case and illustrative of remedial expectations. Conclusion: The order was quashed and the matter remanded with directions for fresh notice stating reasons, a 21-day period to reply, and a requirement that the authority decide de novo by a reasoned, speaking order after hearing within the prescribed time.