2025 (9) TMI 51 - HC - GST

Petition allowed for breach of natural justice; impugned orders set aside; respondent may issue fresh reasoned notice and afford hearing

Vraj Traders Through Proprietor Mr. Vrajesh Bhikhubhai Pansuriya Versus State Of Gujarat & Ors.

HC allowed the petition on grounds of breach of natural justice, holding that no hearing was granted and impugned notices and orders lacked reasons. The ... Violation of principles of natural justice - no hearing was granted to the petitioner before passing the Appellate Order - seeking to restore the registration certificate of the Petitioner - HELD THAT:- In the case of Agarwal Dyeing and Printing Works [2022 (4) TMI 864 - GUJARAT HIGH COURT], the Coordinate Bench of this Court has discussed the law with regard to show cause notice as well as the importance of the principles of natural justice in great detail, where it was held that 'all the writ applications deserve to be allowed solely on the ground of violation of principles of natural justice and, accordingly, the writ applications are allowed.' Keeping in mind the facts of the present case, it appears that no hearing was granted to the petitioner before passing the Appellate Order. Further, the notice proposing cancellation of registration as well as the impugned order for revocation application for cancellation of registration dated 06.07.2022 are without any reasons and in breach of principles of natural justice as well as in breach of the ratio laid down by this Court in the case of Agarwal Dyeing & Printing Works. The facts of the present case and the facts in the case of Agarwal Dyeing & Printing Works, are identical and similar in nature and thereby, it is unable to take any different view than the view taken by the Coordinate Bench of this Court in the case of Agarwal Dyeing & Printing Works. Accordingly, the present petition deserves to be allowed solely on the ground of violation of principles of natural justice. The Appellate Order dated 22.09.2022 as well as the order of dismissal of Revocation Application dated 06.07.2022 as well as order of Cancellation of Registration dated 16.06.2022 set aside with liberty to the respondent No. 2 to issue a fresh notice with particulars of reasons incorporating the details and thereafter to provide reasonable opportunity of hearing to the petitioner and to pass appropriate speaking order on merits - petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether orders cancelling registration, rejecting revocation and dismissing the appeal are sustainable where the show-cause notice and consequential orders are non-speaking, lack reasons and were passed without granting an opportunity of hearing, thereby violating principles of natural justice. 2. Whether a show-cause notice proposing cancellation under the GST scheme must set out jurisdictional facts and particulars (and not mere reproduction of statutory grounds) so as to enable a meaningful reply. 3. Whether the Appellate Authority's order can be sustained where no hearing was afforded and no reasons were communicated in the appellate order (including issues of service and availability of appeal documents). 4. Whether the Court should examine the substantive applicability of statutory rules (e.g., Rule 21(a) of the CGST Rules) in the presence of procedural infirmities, or remit the matter for fresh consideration after curing the procedural defect. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of cancellation/revocation/appeal orders in absence of reasons and hearing (principles of natural justice) Legal framework: The statutory scheme prescribes specific forms and procedures for registration, cancellation and revocation under the GST enactment. Principles of natural justice (audi alteram partem) and the speaking-order doctrine require that quasi-judicial/administrative authorities record cogent reasons when an order results in civil, penal or pecuniary consequences. Precedent Treatment: The Court applied and followed the established line of authority recognizing that reasons are 'heart and soul' of an order and that recording of reasons is imperative for judicial accountability, transparency and effective judicial review. A recent Coordinate Bench judgment of this Court (discussed at length in the impugned judgment) is explicitly followed and treated as binding in the present context. Interpretation and reasoning: The Court examined the show-cause notice and impugned orders and found them to be cryptic/non-speaking and devoid of specific facts or particulars upon which cancellation was proposed. The notice merely reproduced statutory grounds without factual particulars; the revocation rejection and appellate order did not assign independent reasons nor provide an opportunity of hearing before adverse adjudication. Given that cancellation entails civil and penal consequences (including potential liabilities on buyers), the statutory silence as to particulars and absence of reasons renders the procedure illusory and prejudicial. Ratio vs. Obiter: The finding that orders issued without reasons and without affording a reasonable opportunity of hearing violate principles of natural justice and must be quashed is ratio decidendi. Observations on the wider value of recording reasons and their role in transparency and judicial review, while explanatory, reflect settled principle relied upon for the decision. Conclusions: The Court concluded that the impugned show-cause notice, cancellation order, order rejecting revocation and appellate order were in breach of natural justice and the speaking-order doctrine. Consequently, those orders were quashed and set aside. The authority is permitted to issue a fresh notice which must incorporate particulars of reasons and thereafter provide reasonable opportunity of hearing and pass an appropriate speaking order on merits. Issue 2 - Requirement that show-cause notices state jurisdictional facts and particulars Legal framework: Where an order affects civil/penal rights, the show-cause notice must reflect the jurisdictional facts so that the person proceeded against can demonstrate absence of the jurisdictional fact and thereby challenge the authority's competence to pass the adverse order. Precedent Treatment: The Court relied on and applied prior authority emphasizing that generic or form-based reproduction of statutory grounds without factual particulars is inadequate and may amount to denial of a meaningful opportunity to respond. Interpretation and reasoning: A show-cause notice in prescribed form that simply recites the rule or statutory provision fails to inform the recipient of the specific factual basis for the proposed cancellation. This deficiency converts the notice into a mere formality, preventing a prudent person from making an effective reply and resulting in miscarriage of justice. Ratio vs. Obiter: The requirement that show-cause notices incorporate particulars of jurisdictional facts is treated as part of the controlling ratio in quashing the orders. The Court's direction that fresh notices must contain such particulars is operative. Conclusions: The Court held that the existing notice was defective for lack of particulars; it directed the issuing authority, if aggrieved, to issue a fresh notice containing specific reasons and particulars and to afford a reasonable opportunity to reply before passing any fresh order. Issue 3 - Validity of appellate order rendered without hearing and without reasons; issues of service and limitation Legal framework: Appeals under the GST regime are subject to statutory limitation and procedural requirements, including service of orders and hearing opportunities in accordance with natural justice. Appellate orders must be reasoned when they affect rights and liabilities. Precedent Treatment: The Court adhered to the principle that appellate adjudication without affording an opportunity to be heard and without communicating reasons is vulnerable to judicial review and must be set aside where procedural fairness is lacking. Interpretation and reasoning: The appellate order was passed without granting hearing and without assigning independent reasons; further, there were deficiencies in communication/service of the appellate order and related notices. Although an initial representation was made that the appeal was rejected on limitation grounds, the order served later rejected the substance without reasons. The Court found these facts fatal to the appellate process. Ratio vs. Obiter: The decision to quash the appellate order because it was rendered without hearing and without reasons is ratio. The Court did not finally adjudicate issues of limitation or substantive merits, leaving those to be considered afresh by the appellate authority. Conclusions: The appellate order was quashed. The appellate authority is at liberty to consider the matter afresh after issuing a proper notice with particulars and affording a reasonable hearing; issues of limitation and merits to be decided on that fresh record. Issue 4 - Whether substantive rules (e.g., Rule 21(a)) ought to be gone into despite procedural infirmity Legal framework: Where procedural infirmity (violation of natural justice or defective notice) is established, a court may confine its intervention to quashing the impugned orders and remit the matter for consideration on merits by the competent authority, rather than deciding substantive questions in an original review. Precedent Treatment: The Court followed the approach of not adjudicating substantive merits when procedural defects are dispositive, preferring remediation by remand to permit the competent authority to consider facts and law afresh after curing the procedural lapse. Interpretation and reasoning: Although the petitioner challenged applicability of specific rules relied upon by the authority (for example, assertion that the rule applies only where no business is conducted from declared place of business), the Court observed that the matters of substantive applicability were not gone into and that the proof-based assessment should be undertaken by the authority upon a proper notice and hearing. Ratio vs. Obiter: The proposition that substantive legal issues should be left to the authority for fresh adjudication after curing procedural defects is part of the operative decision (ratio) in this case; detailed comments on the substantive rule were not rendered (obiter on merits avoided). Conclusions: The Court declined to decide the substantive applicability of Rule 21(a) or related contentions on merits. Instead it remitted the matter with directions to issue detailed notices and to pass speaking orders after hearing the party; the party is permitted to file replies and relevant documents on the fresh proceedings. Relief and procedural directions Conclusions: All impugned orders (show-cause/cancellation, revocation rejection and appellate order) were quashed and set aside on the sole ground of violation of principles of natural justice and non-speaking orders. Liberty was granted to the authority to issue fresh notice(s) with particulars of reasons, to provide reasonable opportunity of hearing and to pass reasoned orders on merits; the Court expressly did not adjudicate the merits of the substantive tax/registration issues.