Facts of the Case

The Petitioner, M/s. Shree Siddivinayak Publications, is a Hindu Undivided Family (HUF) managed by its Kartha, Mr. Gopal Agarwal. The petitioner operates a business engaged in the publishing of newspapers and was a registered taxable person under the CGST Act, 2017, holding a valid registration certificate dated February 22, 2018.

The dispute began when the Respondent No. 2 (The Superintendent of Central Tax, Balanagar Range) issued a statutory Show Cause Notice (SCN) dated September 2, 2021. The notice called upon the petitioner to show cause as to why its GST registration should not be cancelled, assigning the core reason that the petitioner had failed to furnish its statutory returns for a continuous period of six months.

In response, the petitioner submitted a comprehensive, detailed written objection on October 3, 2021, detailing its administrative challenges and business realities. However, without properly considering or evaluating the objections raised, Respondent No. 2 proceeded to pass an impugned order dated October 29, 2021, summarily cancelling the petitioner’s GST registration. Aggrieved by this, the petitioner preferred an appeal before Respondent No. 1 (The Joint Commissioner, Appeals-II). The First Appellate Authority rejected the appeal via an Order-in-Appeal dated August 17, 2022, sustaining the cancellation on the grounds that the petitioner had allegedly collected taxes from clients without depositing them timely to the exchequer. This forced the petitioner to move the High Court via a Writ Petition under Article 226.

Issues Involved

  1. Whether the action of the tax authorities in cancelling the GST registration of the petitioner without evaluating or addressing the detailed written objections submitted in response to the Show Cause Notice violates the Principles of Natural Justice?
  2. Whether the summary confirmation of registration cancellation by the First Appellate Authority was sustainable when the matter severely, adversely affected the ongoing lawful business operations of the taxpayer?
  3. Whether the case of the petitioner could be resolved by maintaining absolute parity with prior settled legal precedents of the same jurisdiction, specifically the ruling in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeals-1).

Petitioner’s Arguments

  • Violation of Natural Justice: The petitioner argued that passing a summary order of cancellation without dealing with the specific parameters and explanation provided in their detailed objection dated October 3, 2021, amounts to an administrative action devoid of reasons and a clear violation of natural justice.
  • Severe Business Hardship: The petitioner pointed out that they run an active newspaper publication business. The absolute cancellation of GST registration acts as a "civil death" for the commercial enterprise, making it impossible to carry out regular economic activities, thereby infringing upon their fundamental rights under Articles 14 and 19(1)(g) of the Constitution.
  • Willingness to Comply: The petitioner maintained that they did not intend to evade tax obligations and sought an open platform to fully submit, regularize, and furnish all pending statutory returns as provided under the tax laws.

Respondent’s Arguments

  • Failure of Statutory Obligation: The respondents contended that the taxpayer was continuously carrying out business operations and collecting taxes from its clients but systematically failed to file periodical returns and discharge its financial liabilities to the central exchequer.
  • Intent to Evade Tax: Respondent No. 1 observed that the explanations provided during personal hearings were completely insufficient. The authority argued that the petitioner showed an intention to evade payment of timely dues until the strict cancellation process was initiated.
  • Liability Safeguarded: The revenue department highlighted that pursuant to Section 29(3) of the CGST Act, the cancellation order does not absolve or eliminate the taxpayer's liability to discharge past or pending tax liabilities, whether determined before or after the cancellation order.

Court Order / Findings

The division bench of the Hon’ble Chief Justice Ujjal Bhuyan and Hon’ble Sri Justice C.V. Bhaskar Reddy observed that the core legal issue raised in the writ petition was no longer res integra (unsettled). The High Court noted that an identical legal challenge regarding arbitrary registration cancellation had already been carefully analyzed and resolved by the same court in several prior writ petitions, most notably in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeals-1) (Writ Petition No. 27071 of 2022, decided on June 27, 2022).

By maintaining strict judicial discipline and parity with its earlier rulings, the High Court held that because the cancellation of a GST registration drastically and adversely affects active business operations, the taxpayer must be granted a fair, fresh, and real opportunity of being heard.

Consequently, the High Court:

  1. Set aside and quashed the Order-in-Appeal dated August 17, 2022, as well as the original cancellation order dated October 29, 2021.
  2. Remanded the entire matter back to Respondent No. 2 (The Superintendent of Central Tax) for fresh adjudication in accordance with the law.
  3. Directed the authority to grant a fresh opportunity of personal hearing to the petitioner, expressly keeping it open for the petitioner to furnish all their pending statutory returns during such reassessment proceedings.

Important Clarification

The High Court clearly clarified that while the revenue authorities must ensure strict tax compliance, the right to run a business shouldn't be choked by administrative oversights. The court allowed the taxpayer a curative path by remanding the matter, thereby reinforcing that the object of Section 29 is to regulate compliance, and if a taxpayer is willing to step forward, come clean, and furnish all outstanding returns under the statute, the department must evaluate that option on its merits rather than making the business shutdown permanent.

Sections Involved

  • Section 29 of the Central Goods and Services Tax (CGST) Act, 2017: Governs the cancellation or suspension of GST registration.
  • Section 29(2)(c) of the CGST Act, 2017: Pertains specifically to the cancellation of registration by the proper officer where a registered person filing returns under composition levy or normal taxpayer fails to furnish returns for a continuous period of six months.
  • Section 29(3) of the CGST Act, 2017: Explicitly clarifies that the cancellation of registration does not affect the statutory liability of a person to pay tax and other dues for any period prior to or after the date of cancellation.
  • Article 226 of the Constitution of India: Invoked to approach the High Court under its Special Original Jurisdiction seeking a Writ of Mandamus to set aside the arbitrary orders.
  • Articles 14, 19(1)(g), and 21 of the Constitution of India: Constitutional provisions cited by the petitioner to highlight violations regarding the right to equality, freedom of trade/business, and right to life/livelihood.

Link to download the order -https://mytaxexpert.co.in/uploads/1782967999_47compressed.pdf

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