Order canceling GST registration quashed, not granted opportunity for hearing: Allahabad HC

Jai Nath Rai Construction vs. State of Up and three others (Allahabad High Court)

The Allahabad High Court held that passing an ex-parte order canceling GST registration without giving any opportunity for hearing is violative of the principle of natural justice. Therefore, the order has been annulled.

Facts- The petitioner is a concerned company engaged in construction work. On 22.5.2023, respondent No. 4 issued a notice directed under Rule 21(d) of the Rules for cancellation of registration and thereafter an ex parte order was passed canceling the GST registration of the petitioner without the to give the petitioner some opportunity for hearing.

Conclusion- This Court in the case of SS Traders has held that denial of opportunity of hearing the petitioner as prescribed in the first proviso to sub-section (2) of section 29 of the 2017 Act taints both the proceedings and the orders. canceling the petitioner’s registration.

Held that in the facts and circumstances of the case and the law laid down by this Court, the impugned orders cannot be sustained in the eyes of law and the same are hereby quashed.

FULL TEXT OF THE JUDGMENT/ORDER OF THE HIGH COURT OF ALLAHABAD

1. Learned counsel for the petitioner and standing counsel for the state respondents.

2. Through this petition, the petitioner inter alia prays for the following relief:

“i)”(a) In order to issue any appropriate writ, order or direction in the nature of certiorari, the Hon’ble Court would be pleased to set aside the impugned order dated 27.6.2024 passed by respondent No. 1. 3 in defective appeal No. 2425AAZA000144/2024 (GST) year 2023-24.

(b) In order to issue any appropriate writ, order or direction in the nature of certiorari, the Hon’ble Court will be pleased to set aside the order passed for canceling the GST registration of the petitioner’s vide order dated 01.6.2023, adopted by respondent No. 4.”

3. Counsel for the petitioner submits that the petitioner is a concerned owner engaged in construction work and has obtained GST IN for that purpose – On 22.5.2023, respondent No. 4 filed an application under Section 21 (d) of the Rules directed notice issued for cancellation of registration and thereafter an ex parte order was passed canceling the GST registration of the petitioner without giving any opportunity of hearing to the petitioner. He submits that the order canceling registration has been passed in violation of the principles of natural justice as the petitioner was not given an opportunity of hearing. He further states that the defendant issued the contested decision without any understanding. He states that an appeal was filed against the said decision, which was also dismissed on the basis of the decision dated 27.6.2024.

4. In support of his argument, counsel for the petitioner has relied on the judgment of this Court in the case Surendra Bahadur Singh State of UP and others (Tax Declaration No. 172 of 2023, decided on 23.8.2023), M/s Namo Narayan Singh Vs. State of UP and others (Tax return No. 1476 of 2022, decided on 10.10.2023) and M/s SS Traders Vs. State UP (Tax Return No. 651 of 2021, decided on 2.11.2021).

5. Per contra, learned that the Standing Counsel has supported the impugned orders.

6. After hearing the parties’ lawyers, the court took note of the documents.

7. The cancellation order, dated 6.2023, is found below:-

Form GST REG-19
(See rule 22 (3))

Reference number:ZA090623006509H

Date 01/06/2023

Nasty

VISHVBANDHU RAI

BELA SULTANPUR, LUDUHI SIPAH ROAD, Bela Sultanpur, Mau,

Uttar Pradesh, 275307

GSTIN/UIN:09BDSPR0333P2ZR

Application Reference Number (ARN): AA090523182863V

Date

Order to cancel registration

This relates to the Notice of Cause issued dated 22/05/2023.

whereas no response to the notice was submitted for unfounded reasons;

and whereas the undersigned believes, based on information available at this office, that your registration may be canceled for the following reason(s):

Rule 21(d) Person Violates Provision of Rule 10A (Bank Records)

The effective date of cancellation of your registration is 01/06/2023

2. Please refer to the attached supporting documents for the specific case – Not applicable

3. It may be noted that a registered person filing a return under sub-section (1) of Section 39 of the CGST Act, 2017 is required to file a final return in FORM GSTR within three months from the date of this order -10.

4. You are required to submit all your outstanding returns.

5. It may be noted that the cancellation of registration shall not affect the obligation to pay taxes and other levies under this Act or to comply with any obligation under this Act or the rules adopted thereunder for a period prior to the date of cancellation, regardless of whether such taxes and other charges are assessed before or after the date of

Location: Uttar Pradesh
Date:01/06/2023

Alok Chandra Gautam
Assistant Commissioner
Mau Sector-3

8. Upon examination of the said decision, it appears that no reason has been given for the issuance of the contested decision.

9. The Division Bench of this Court in the case of Surendra Bahadur Singh (supra) has held as under:-

“6. Learned counsel for the petitioner submits that though no error can be found in the order dismissing the appeal as the Appellate Authority has no jurisdiction to condone the delay within the scheme of law. However, he submits that the order canceling the appeal is registration without application of spirit; he draws my attention to the impugned decision dated 07.01.2023, which does not reveal any application of the mind. He thus submits that the quasi-judicial order adversely affecting the petitioner’s right to transact business as guaranteed by Article 19 of the Constitution of India, the same has been done without any application of mind, which is neither the intention. of the Act nor can it be considered to be in accordance with the mandate of Article 14 of the Constitution of India. He further submits that since the appeal has not been decided, the doctrine of merger will have no application and only the decision dated 07.01.2023 will affect the petitioner and since there is no basis for the same, the same can be done. challenged before this Court as decided by the Hon’ble Supreme Court in the case of Whirlpool Corporation v. Registrar of Trademarks, Mumbai and Ors. – (1998) 8 SCC 1.

7. He further relies on the judgment of this Court in the case of Om Prakash Mishra State of UP & Ors.; Tax Notice No. 100 of 2022, decided on 06.09.2022, wherein this court has held that every administrative authority or quasi-judicial authority must necessarily state reasons as reasons are the heart and soul of any judicial or administrative order.

8. In the present case, after taking note of the decision of January 1, 2023, there clearly appears to be no reason to take such a harsh measure of cancellation of the registration. Since the decision does not contain any application of the mind, it does not meet the test of Article 14 of the Constitution of India. As such, the impugned decision dated 07.01.2023 (Annexure – 2) is set aside. The request is therefore granted.

9. However, it is directed that the petitioner must file a reply to the show-cause notice within a period of three weeks. The Adjudicating Authority i.e. the Deputy Commissioner Gonda will proceed to pass fresh order after giving opportunity to the petitioner for hearing. and after considering whatever defense he might make.

10. A similar view has been taken by another Division Bench of this Court in the case of M/s Kanhaiya Lal Construction and Superintendent Mainpuri CGST, (Neutral Citation No. 2024:-AHC120411-DB), whereby the court annulled the contested decision and remanded the case.

11. This Court in the matter of S. Traders (supra) has held as under:-

“A mere perusal of the format prescribed under Rule 22(1) for the show cause notice reveals that there is a difference between the show cause notice dated 12.5.2021 issued to the petitioner and in the form of the aforementioned show-cause notice. The specific date and time must necessarily be stated in the notice to show a reason conspicuous by its absence in the notice to the petitioner. Moreover, the proviso to sub-section (2) of Article 29 requires that the person whose registration is proposed to be canceled shall be heard before the registration is cancelled.

Paragraph 11 of the writ petition categorically states that after issuance of show case notice, no opportunity of hearing was granted to the petitioner by respondent No. 4 and no date was fixed for the hearing nor was the petitioner even was called to “take place”. the case” before defendant No. 4.

….

In the considered opinion of this Court, denial of opportunity of hearing to the petitioner as prescribed in the first proviso to sub-section (2) of section 29 of the Act of 2017 renders the proceedings null and void as do the orders canceling the registration of the petitioner.”

12. In view of the facts and circumstances of the case and the law laid down by this Court, the impugned orders cannot be sustained in the eyes of law and are hereby

13. The petition succeeds and is allowed.

14. The petitioner is directed to respond to the show-cause notice within four weeks from today and the judicial authority is directed to proceed the new one and adopt a reasoned and speaking order in accordance with law, after providing due opportunity to be heard