Facts of the Case

The petitioner, Acambis Helpline Management Pvt. Ltd., was engaged in the business of manpower supply and was duly registered under the GST laws. The GST Department issued a show cause notice dated 02.12.2021 alleging that the petitioner had failed to furnish GST returns for a continuous period of six months under Section 39 of the CGST Act and proposed cancellation of its GST registration.

The petitioner submitted that due to the illness of his mother and severe financial difficulties, he was unable to respond to the show cause notice within the prescribed time. Consequently, the Proper Officer cancelled the GST registration by order dated 03.01.2022 under Section 29 of the CGST Act.

The statutory appeal filed by the petitioner was dismissed on the ground of limitation. Since the GST Appellate Tribunal had not been constituted in the State of Uttar Pradesh, the petitioner approached the Allahabad High Court by filing the present writ petition.

 

Issues Involved

  1. Whether cancellation of GST registration merely because no reply was filed to the show cause notice is legally sustainable.
  2. Whether an order cancelling GST registration without recording reasons is liable to be set aside as a non-speaking order.
  3. Whether judicial review is maintainable where the statutory appeal has been dismissed on limitation and the GST Appellate Tribunal is not constituted.

 

Petitioner's Arguments

  • The petitioner contended that the failure to reply to the show cause notice was due to genuine personal and financial hardships.
  • The cancellation order was a non-speaking order containing no reasons except stating that no reply had been submitted.
  • Even if no reply was filed, the Proper Officer was required to independently examine the facts before cancelling registration.
  • The petitioner relied upon the Allahabad High Court judgment in M/s Chandrasen, Sarda Nagar, Lucknow vs Union of India, wherein it was held that orders passed without reasons or application of mind violate Article 14 of the Constitution.
  • Since the GST Appellate Tribunal had not been constituted, the writ petition was maintainable.

 

Respondent's Arguments

  • The Department justified cancellation of registration on the ground that the petitioner failed to file GST returns continuously for six months.
  • The petitioner did not submit an effective reply to the show cause notice.
  • The appellate authority rightly dismissed the appeal as barred by limitation.

 

Court Order / Findings

The Allahabad High Court observed that the cancellation order merely recorded that no reply had been submitted by the petitioner and did not disclose any independent reasoning or application of mind.

The Court held that even where the taxpayer fails to respond to the show cause notice, the Proper Officer is duty-bound to examine the facts of the case and record reasons justifying cancellation of GST registration under Section 29 of the CGST Act.

Relying upon its earlier decision in M/s Chandrasen, Sarda Nagar, Lucknow vs Union of India, the Court reiterated that administrative and quasi-judicial orders affecting valuable rights must be reasoned and cannot be arbitrary.

Accordingly:

  • The cancellation order dated 03.01.2022 was declared illegal and set aside.
  • The writ petition was allowed.
  • The matter was remanded to the adjudicating authority.
  • The petitioner was granted three weeks to file a reply to the show cause notice.
  • The Proper Officer was directed to pass a fresh speaking order in accordance with law after considering the petitioner's reply.

 

Important Clarification

  • Cancellation of GST registration cannot be sustained merely because the taxpayer failed to submit a reply to the show cause notice.
  • Authorities exercising powers under Section 29 of the CGST Act must record proper reasons before cancelling registration.
  • Non-speaking and mechanical cancellation orders violate the principles of natural justice and Article 14 of the Constitution.
  • Where the GST Appellate Tribunal has not been constituted, the High Court can exercise writ jurisdiction in appropriate cases.
  • The judgment reinforces that every quasi-judicial order affecting taxpayer rights must be supported by proper reasoning.

Sections Involved

  • Section 29 of the Central Goods and Services Tax Act, 2017 – Cancellation of Registration
  • Section 39 of the Central Goods and Services Tax Act, 2017 – Furnishing of Returns
  • Article 14 of the Constitution of India – Requirement of Reasoned and Non-Arbitrary Orders

Link to download the order -
https://mytaxexpert.co.in/uploads/1782971116_182compressed.pdf

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