Facts of the Case

The petitioner, M/S Purna Trading Company, a proprietorship firm registered under GSTIN 09CCBPS0675N1Z0 and engaged in retail wholesale business, claimed to have deposited all due tax liabilities on time. Following a survey of its business premises on 09.11.2020, a notice under Section 29(2) of the UPGST Act was issued directing the petitioner to appear on 27.11.2020. Despite an adjournment application, the petitioner's GST registration was cancelled ex parte on 20.11.2020/7.12.2020. Its revocation application dated 04.12.2020 was rejected by order dated 21.01.2021, and the subsequent appeal was dismissed by order dated 17.11.2021 without assigning any reason. The petitioner approached the Allahabad High Court, invoking its writ jurisdiction since the GST Tribunal was not yet functional in Uttar Pradesh.

Issues Involved

  1. Whether the cancellation of GST registration and rejection of the revocation application, passed without recording reasons, could be sustained.
  2. Whether the appellate authority's summary dismissal of the appeal, again without reasons, was legally valid.
  3. What consequence should follow where the petitioner itself failed to respond to notices or appear before the appellate authority on multiple occasions.

Petitioner's Arguments

  • The petitioner had deposited all due tax liabilities within time without any default, yet its registration was cancelled ex parte without considering the grounds raised in its adjournment application.
  • The revocation application was rejected without any cogent reasoning, and the subsequent appeal was dismissed by the impugned order without assigning any reason at all.
  • Reliance was placed on this Court's earlier decisions in M/s Shyam Sundar Sita Ram v. State of UP and M/s Gaurav Trading Company v. State of U.P., where similarly unreasoned orders had been set aside.

Respondent's Arguments

  • Neither any reply nor any material was submitted by the petitioner in response to the show-cause notice, justifying the cancellation of registration.
  • The revocation application had also rightly been rejected on the facts available.
  • Before the appellate authority, the petitioner was granted opportunity but chose not to appear on four separate dates; since Section 107(9) permits only three adjournments, the ex parte dismissal of the appeal was justified.

Court Order/Findings

  • The Court held that GST registration can only be cancelled in accordance with Section 29 of the UPGST Act, and the impugned cancellation order, the rejection of the revocation application, and the appellate dismissal were all passed without recording any cogent reasons.
  • Reaffirming that "reason is the heartbeat of every conclusion" and that failure to give reasons amounts to a denial of justice and violates natural justice, the Court held the orders could not be sustained in law.
  • Noting, however, that the petitioner itself had neither replied to the notice nor appeared before the appellate authority despite several opportunities, the Court set aside the impugned orders subject to the petitioner depositing costs of Rs.20,000/- before the first appellate authority within two weeks.
  • The matter was remitted to the first appellate authority to pass a fresh, reasoned and speaking order, preferably within two months, after affording reasonable opportunity of hearing to the parties.

Important Clarification

An order cancelling GST registration, rejecting a revocation application, or dismissing an appeal must record reasons; an unreasoned order is inherently infirm and violates natural justice regardless of how strong the department's case might otherwise be. At the same time, a petitioner's own default in responding to notices or appearing before the authority can still be visited with costs even while the unreasoned order is set aside and the matter remanded.

Sections Involved

  • Section 29, Uttar Pradesh Goods and Services Tax Act, 2017 — governs cancellation of GST registration and the procedure for revocation.
  • Section 107(9), Uttar Pradesh Goods and Services Tax Act, 2017 — limits the number of adjournments (three) that may be granted to a party before the appellate authority.

Decision – In Favour of

The writ petition was allowed, in favour of the Assessee. The cancellation of registration, the rejection of revocation, and the appellate dismissal were all set aside for want of reasons, but the relief was tempered by imposing costs of Rs.20,000/- on the petitioner for its own lapses, and the dispute was remanded for a fresh reasoned order rather than concluded outright in the petitioner's favour on merits.

Related Case Laws

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

Case Details

  • Court: Allahabad High Court
  • Case No.: WRIT TAX No. 924 of 2022
  • CNR: 2023:AHC:194652
  • Coram: Hon'ble Mr. Justice Piyush Agrawal
  • Decision Date: 2023-10-10
  • Disposal Nature: Allowed (remanded)

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