GST registration cancellation for six months' return default challenged; no personal hearing, so cancellation set aside for fresh decision.

Cancellation of GST registration was challenged on the ground that the adjudication order was passed without granting a personal hearing, despite the alleged default of non-filing monthly returns for a continuous six-month period. The HC held that denial of a personal hearing vitiated the adjudication as a breach of natural justice; further, since the validity of certain GST notifications is pending before the SC and could bear on the impugned action, a fresh decision was warranted to avoid multiplicity and conflicting outcomes. The impugned cancellation orders were set aside and the matter was remitted to the competent authority for reconsideration and a fresh adjudication in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1) Whether the ex parte adjudication order confirming tax, interest and penalty under Section 73(9) (and the corresponding summary) should be set aside and the matter remitted for fresh adjudication, in view of the petitioner's grievance of non-receipt of notices and absence of personal hearing, and because the validity of notifications extending limitation is pending consideration before the Supreme Court.

2) Whether the cancellation of GST registration should be quashed and registration restored, and if so, on what conditions and within what timeframe.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Setting aside the adjudication order under Section 73(9) and remand pending Supreme Court decision

Legal framework (as considered by the Court): The Court dealt with adjudication under Section 73(9) and the contention of limitation under Section 73(10), alongside the respondents' reliance on notifications extending limitation; the Court also took note that the validity of such notifications was stated to be pending before the Supreme Court and would have a bearing on the impugned proceedings.

Interpretation and reasoning: The Court considered that the petitioner sought an opportunity to file reply/documents, asserting non-receipt of notices and that the proceedings culminated in an ex parte order. The Court also found it material that the legality/validity of the notifications relied upon for limitation extension was "seized" by the Supreme Court, and that the outcome there could impact the impugned proceedings. To avoid multiplicity of proceedings and conflicting orders, the Court held it appropriate to set aside the adjudication and remit the matter, directing fresh adjudication to be undertaken after the Supreme Court disposes of the pending matter.

Conclusions: The Court set aside the adjudication order dated 26.03.2024 and its summary, remitted the matter to the adjudicating authority for reconsideration and a fresh adjudication order to be passed in accordance with law after the Supreme Court's disposal of the pending matter. The Court further directed that the period from 26.03.2024 until the Supreme Court's disposal shall be excluded for limitation purposes.

Issue 2: Quashing cancellation of registration and directing restoration subject to compliance

Legal framework (as considered by the Court): The Court addressed the impugned cancellation order of GST registration and the consequential prayer for reinstatement/restoration, recording the petitioner's submission that returns would be filed and taxes paid if cancellation were set aside.

Interpretation and reasoning: The Court placed on record the petitioner's submission regarding willingness to regularize compliance by filing returns and paying dues. Proceeding on that basis, the Court found it appropriate to quash the cancellation and order restoration, while safeguarding revenue interests by imposing a time-bound condition for filing returns and paying up-to-date tax with interest and penalty.

Conclusions: The Court quashed the cancellation order dated 08.08.2022 and directed the respondents to reinstate/restore the GST registration within four weeks, subject to the petitioner filing GST returns and paying up-to-date tax together with interest and penalty within the same four-week period from receipt of the order.

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