Facts of the Case

The petitioner, M/s Champion Group of Company, challenged the order dated 26.11.2022 passed by the Additional Commissioner, State Tax (Appeals), whereby the application for revocation of cancellation of GST registration was rejected. The petitioner also challenged the ex parte order dated 07.09.2021 passed by the Joint Commissioner of State Tax cancelling its GST registration under Section 29 of the Bihar Goods and Services Tax Act, 2017.

The petitioner contended that the registration was cancelled without granting an effective opportunity of hearing and that the cancellation order was passed in violation of the principles of natural justice. The petitioner further sought restoration of GST registration, de-freezing/de-attaching of its bank account, and protection from coercive recovery proceedings.

 

Issues Involved

  1. Whether the cancellation of GST registration under Section 29 of the Bihar GST Act, 2017 was legally sustainable.
  2. Whether the cancellation order passed without proper opportunity of hearing violated the principles of natural justice.
  3. Whether a non-speaking and cryptic cancellation order could be sustained in law.
  4. Whether the petitioner was entitled to restoration of GST registration and consequential relief.

 

Petitioner’s Arguments

  • The GST registration was cancelled by an ex parte order without granting a proper opportunity to submit an effective reply or to be heard.
  • The cancellation order was passed mechanically and did not record any reasons justifying cancellation.
  • The appellate authority wrongly rejected the application for revocation of cancellation.
  • Due to the cancellation of registration, the petitioner's bank account was attached and the business suffered serious civil and financial consequences.
  • The petitioner had requested condonation of delay considering the impact of the Covid-19 pandemic, but the authorities failed to consider the request in a fair manner.

 

Respondent’s Arguments

  • The State defended the action taken under the provisions of the Bihar Goods and Services Tax Act, 2017.
  • During the proceedings, the State submitted that the issue relating to delay in filing GST returns would not be reopened if appropriate directions were issued by the Court.

 

Court Order / Findings

The Patna High Court allowed the writ petition and held that:

  • The cancellation order was non-speaking, cryptic, and failed to disclose the reasons for cancellation.
  • The authority failed to properly consider the show cause notice and the petitioner's response.
  • Cancellation of GST registration carries serious civil, pecuniary, and penal consequences; therefore, adherence to the principles of natural justice is mandatory.
  • The order violated the principles of natural justice and could not be sustained.
  • The Court observed that the petitioner had already been granted GST registration and, considering the peculiar facts including the Covid-19 pandemic, the authority ought to have considered condonation of delay.
  • Accordingly, the Court:
    • Quashed the cancellation order dated 07.09.2021.
    • Restored the petitioner's GST registration.
    • Directed the Commissioner, Department of State Taxes, Government of Bihar, to finalize the petitioner's assessment and pass appropriate orders in accordance with law.
    • Directed that the issue regarding delay in filing GST returns shall remain closed and shall not be raised again.

 

Important Clarification

  • GST registration cannot be cancelled through a mechanical or non-speaking order.
  • Authorities must provide an effective opportunity of hearing before cancelling registration.
  • Orders having civil and penal consequences must contain proper reasons.
  • The principles of natural justice are integral to proceedings relating to cancellation of GST registration.
  • Courts may restore GST registration where cancellation is arbitrary, non-speaking, or passed in violation of statutory procedure.

 

Sections Involved

  • Section 29 of the Bihar Goods and Services Tax Act, 2017 – Cancellation of Registration.
  • Principles of Natural Justice.


Link to download the order -

https://www.mytaxexpert.co.in/uploads/1782894646_162compressed.pdf

 

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