2025 (11) TMI 1785 - HC - GST

GST registration cancellation set aside for breach of natural justice; non-speaking order ignoring reply remanded for fresh decision

HC held that the cancellation of the petitioner's GST registration was vitiated for breach of natural justice, as the impugned order contained only a bare ... Cancellation of Petitioner’s GST Registration - even though the Petitioner had filed a detailed reply raising several contentions, the impugned order cancelling the Petitioner’s GST registration contains no reasons but only a conclusion - principles of natural justice - HELD THAT:- The impugned order nowhere reflects consideration of the Petitioner’s case or the documents produced by the Petitioner along with the reply to the show cause notice. The reasons provide the link between the actual decision and the decisionmaker's mind. These are completely absent from the impugned cancellation order of 22 September 2025. The impugned cancellation order dated 22 September 2025 set aside and matter remanded back to the Respondent No. 1 with directions to dispose of the show cause notice dated 15 September 2025 in accordance with law and on its own merits as expeditiously as possible. Petition allowed by way of remand. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the Court should exercise writ jurisdiction against an order cancelling GST registration, notwithstanding the availability of an alternate remedy, where the order is alleged to be non-speaking and in breach of principles of natural justice. 1.2 Whether the order cancelling GST registration, which merely recites a statutory ground under Rule 21(e) without dealing with the assessee's detailed reply and supporting documents, is vitiated for absence of reasons and non-consideration of relevant material. 1.3 Whether the show cause notice proposing cancellation of GST registration and the interim suspension of registration ought to be quashed along with the cancellation order. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Exercise of writ jurisdiction despite alternate remedy Interpretation and reasoning The Court noted that ordinarily such matters of cancellation of GST registration are relegated to the alternate remedy. However, in the present case, it was specifically contended and found that a detailed reply with several contentions and supporting documents (tax invoices, e-way bills, ledger statements, bank statements showing sample payments) had been filed by the petitioner, yet the impugned order of cancellation contained only a bare conclusion without any reasoning or discussion of the petitioner's case. The order did not reflect consideration of the reply or documents. The Court held that passing such non-speaking and unreasoned orders, without dealing with the defences raised, amounts to a violation of the principles of natural justice and fair play. In view of this evident failure of natural justice, the Court chose to entertain the petition despite the availability of an alternate remedy. Conclusions The Court held that the writ petition was maintainable and intervention justified because the impugned cancellation order was non-speaking, unreasoned, and passed in breach of the principles of natural justice. Issue 2: Validity of the cancellation order for want of reasons and non-consideration of reply Legal framework (as discussed) The impugned order invoked Rule 21(e), which concerns cancellation of registration where a person avails input tax credit in violation of section 16 of the Act or the rules made thereunder. The Court also referred to the general requirement that reasons must form the link between the decision and the decision-maker's mind, reflecting observance of principles of natural justice. Interpretation and reasoning The show cause notice dated 15 September 2025 was replied to in detail on 18 September 2025 with accompanying documents. The impugned order dated 22 September 2025 merely recited that the reply and submissions were examined and then concluded that the registration was liable to be cancelled 'for following reason(s): Rule 21(e)-person avails ITC in violation of the provisions of section 16 of the Act or the rules made thereunder.' The Court held that this was 'more of a conclusion than reasoning' and that the order nowhere reflected consideration of the petitioner's specific contentions or documents. It emphasized that reasons are required to provide the link between the decision and the decision-maker's mind, and such reasons were 'completely absent' from the impugned order. Conclusions The Court held that the cancellation order dated 22 September 2025 was vitiated for failure to furnish reasons and for non-consideration of the petitioner's reply and supporting documents, amounting to violation of principles of natural justice. The order was quashed and set aside, and the matter was remanded to the proper authority (Respondent No. 1) to dispose of the show cause notice dated 15 September 2025 afresh, in accordance with law and on its own merits, as expeditiously as possible. Issue 3: Request to quash the show cause notice and interim suspension of registration Interpretation and reasoning The petitioner further sought quashing of the show cause notice and the interim suspension of GST registration. The Court declined. It held that the show cause notice could not be termed 'without jurisdiction.' Allegations contained in the notice, though alleged to be false by the petitioner, could not be adjudicated in the writ proceedings and must be examined by the competent authority in the course of adjudication. As regards interim suspension, the Court noted that it had been operative for only about two months, and given the nature of the allegations, it could not be said that the action was completely without jurisdiction or disproportionate. However, recognising the impact of suspension, the Court stressed that adjudication should not be delayed and that the show cause notice must be disposed of expeditiously. Conclusions The Court refused to quash the show cause notice and the interim suspension of GST registration. It directed that the show cause notice, which entails suspension of registration, be adjudicated on its own merits and in accordance with law within four weeks from the date the petitioner files an authenticated copy of the Court's order before the competent authority. The rule was made partly absolute to the extent of quashing the cancellation order and issuing directions for expeditious adjudication, with no order as to costs.