Facts of the Case

The petitioner, M/s Kamlakshi Travels Gardanibagh, challenged the order dated 12.02.2021 passed by the Joint Commissioner of State Tax cancelling its GST registration under Section 29 of the Bihar GST Act, 2017. The petitioner also challenged the appellate order dated 24.11.2022, whereby the application seeking revocation/restoration of registration was rejected.

The petitioner submitted that the cancellation order was passed ex parte without granting an effective opportunity of hearing. It was also contended that the cancellation adversely affected its business and resulted in attachment/freezing of its bank account.

The High Court examined the cancellation order and found that it neither disclosed proper reasons nor reflected consideration of the petitioner's reply or explanation.

 

Issues Involved

  1. Whether the GST registration could be cancelled by passing a cryptic and non-speaking order under Section 29 of the Bihar GST Act.
  2. Whether cancellation of GST registration without assigning proper reasons violates the principles of natural justice.
  3. Whether the appellate authority was justified in rejecting the request for restoration of registration.
  4. Whether the petitioner's GST registration deserved restoration considering the facts of the case.

 

Petitioner's Arguments

  • The cancellation order was passed ex parte without granting an effective opportunity of hearing.
  • The order did not disclose any reasons for cancellation and was passed mechanically.
  • The petitioner had requested condonation of delay in filing returns after the Covid-19 pandemic.
  • The appellate authority failed to appreciate the factual circumstances while rejecting the application for revocation.
  • Cancellation of GST registration had severe civil and financial consequences including freezing of the bank account.

 

Respondent's Arguments

  • The State defended the cancellation proceedings initiated under the GST law.
  • During the hearing, the State fairly submitted that the issue regarding delay in filing returns would not be reopened if the registration was restored.

 

Court Findings / Order

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

  • The cancellation order was non-speaking, cryptic and devoid of reasons.
  • The authority failed to indicate the grounds for cancellation or consider the petitioner's explanation.
  • Such an order violated the principles of natural justice, particularly when it resulted in serious civil and penal consequences.
  • The authority ought to have considered the petitioner's request for condonation of delay, especially in the peculiar circumstances following the Covid-19 pandemic.
  • The order dated 12.02.2021 cancelling GST registration was quashed.
  • The petitioner's GST registration was restored.
  • The Commissioner was directed to complete assessment or pass appropriate orders in accordance with law.
  • The Court further recorded that the issue relating to delay in filing returns would remain closed and should not be raised again.

Accordingly, the writ petition was allowed.

 

Important Clarification

  • A GST registration cannot be cancelled through a mechanical or non-speaking order.
  • Authorities are required to record clear reasons while exercising powers under Section 29 of the GST Act.
  • Cancellation orders having civil and penal consequences must strictly comply with the principles of natural justice.
  • Failure to assign reasons or consider the taxpayer's explanation renders such orders liable to be set aside.
  • Courts may restore GST registration where cancellation has been effected arbitrarily or without proper reasoning.

 

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://mytaxexpert.co.in/uploads/1782968885_170compressed.pdf

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