Facts of the Case

M/S Makewell Pharma, a proprietorship concern engaged in civil contractual work and registered under the GST Act, had its registration cancelled by order dated 23.12.2022 passed by the Superintendent, Sector-20, Lucknow, on the ground of non-filing of returns under Section 39 for a continuous period of six months. A show-cause notice dated 09.11.2022 had been issued, but the petitioner could not respond, citing lack of knowledge on account of the COVID-19 upsurge. The petitioner's subsequent appeal was dismissed by the Appellate Authority as time-barred, since the Act does not permit condonation of delay beyond the prescribed period. The petitioner then approached the Allahabad High Court, Lucknow Bench, challenging the cancellation order itself as a non-speaking order.

Issues Involved

  1. Whether a GST registration cancellation order that discloses no reasons violates Article 14 of the Constitution.
  2. Whether such an order can be challenged directly before the writ court despite dismissal of the statutory appeal on limitation, without the doctrine of merger applying.

Petitioner's Arguments

  • The appellate order dismissing the appeal for delay was not under challenge, since the Appellate Authority had no power to condone delay.
  • The cancellation order dated 23.12.2022 was passed without application of mind and disclosed no reasons, violating Article 14.
  • As the appeal was never decided on merits, the doctrine of merger did not apply, and the cancellation order remained open to challenge, relying on Whirlpool Corporation vs Registrar of Trademarks.
  • Reliance was placed on Om Prakash Mishra vs State of U.P., where the Court held that reasons are the heart and soul of any administrative or quasi-judicial order.

Respondent's Arguments

  • Represented by the learned Standing Counsel; no substantive defence of the reasoning in the cancellation order is recorded in the judgment.

Court Order-Findings

  • The impugned order records the reason for cancellation simply as "No Response," with no computation of tax, interest or penalty and no engagement with the facts.
  • The Court held the order suffered from complete non-application of mind and did not satisfy the test of Article 14, and accordingly set aside the cancellation order dated 23.12.2022.
  • The petitioner was directed to file a reply to the show-cause notice within three weeks, and the Adjudicating Authority was directed to pass a fresh, reasoned order after granting an opportunity of hearing.
  • The Department was left at liberty to proceed afresh in accordance with law.

Important Clarification

  • A GST registration cancellation order must record reasons; an order that merely states "No Response" without engaging with the show-cause notice or the assessee's position fails the Article 14 standard and is liable to be quashed, irrespective of whether the statutory appeal was dismissed on limitation.

Sections Involved

  • Section 39, Central Goods and Services Tax Act, 2017 - requires filing of periodic returns; non-filing for six continuous months founded the show-cause notice.
  • Article 14 and Article 19, Constitution of India - equality before law and right to carry on business, invoked to test the validity of a non-speaking cancellation order.

Decision-In Favour of

Assessee. The cancellation order was quashed and the matter remitted for a fresh, reasoned decision after hearing.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

Court: High Court of Judicature at Allahabad, Lucknow Bench
Case No.: Writ Tax No. 207 of 2023
Coram: Hon'ble Vivek Chaudhary, J. and Hon'ble Manish Kumar, J.
Date of Decision: 16.10.2023

Link to Download the Order

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