Facts of the Case

Vishwanath Traders and two others challenged the cancellation of GST registration of petitioner no. 3, effected by order dated 03.09.2021 of the respondent no. 5, under the Central Goods and Services Tax Act, 2017. The petitioners claimed that neither any prior notice nor the cancellation order was ever served on them, and that they learnt of the cancellation only when their banker, HDFC Bank, informed them that their account had been frozen pursuant to the Assistant Commissioner's order. On inquiry, it emerged that registration had been cancelled on the ground that input tax credit availed on purchases from M/s Anant Enterprises, Kanpur, was found bogus. On receiving the undated order, the petitioners filed a first appeal, which was dismissed on 28.07.2023 by the respondent no. 4 without assigning any reason. This Writ Tax petition was entertained by the Allahabad High Court since the GST Appellate Tribunal was not yet functional in Uttar Pradesh.

Issues Involved

  1. Whether the cancellation of GST registration, effected without notice or service of the order, could be sustained.
  2. Whether an appellate order dismissing the appeal without recording any reasons satisfies the requirements of natural justice.
  3. Whether the matter warranted remand to the first appellate authority for a fresh, reasoned decision.

Petitioner's Arguments

  • The registration of petitioner no. 3 was cancelled without any prior notice or opportunity of hearing, and the cancellation order itself was never served on the petitioners.
  • The petitioners learnt of the cancellation only when their bank account was frozen, and had to seek information from the department to obtain the undated cancellation order.
  • The first appellate authority dismissed the appeal summarily without assigning any reasons, relying on a recent, factually identical Allahabad High Court decision in M/s Namo Narayan Singh vs. State of U.P. (Writ Tax No.1476 of 2022) for the proposition that such orders cannot be sustained.

Respondent's Arguments

  • The State authorities supported the impugned cancellation and appellate orders and prayed for dismissal of the writ petition.

Court Order/Findings

  • The impugned cancellation order recorded no cogent reason for cancelling the GST registration of petitioner no. 3, and the appellate authority had summarily dismissed the appeal without assigning any reason whatsoever.
  • Reasoned orders are a fundamental requirement of natural justice; an order lacking reasons is indefensible, particularly where it is subject to further challenge, and its absence amounts to a denial of justice, following the Namo Narayan Singh precedent and settled Supreme Court authority on the duty to give reasons.
  • The writ petition was allowed, the impugned orders were set aside, and the matter was remitted to the first appellate authority to pass a fresh, reasoned and speaking order, preferably within two months of production of a certified copy, after affording reasonable opportunity of hearing.

Important Clarification

  • An order cancelling GST registration, or an appellate order confirming/rejecting a challenge to such cancellation, must record cogent reasons; a reasonless order violates natural justice and is liable to be set aside regardless of the underlying merits of the ITC allegation.
  • Non-service of the cancellation order and the underlying notice is, independently, a ground for interference, since it deprives the assessee of a meaningful opportunity to respond before the order takes effect.

Sections Involved

  • Section 29, CGST Act, 2017 — cancellation of GST registration, including on grounds of contravention such as availment of fraudulent input tax credit.
  • Section 107, CGST Act, 2017 — statutory appeal against orders of the proper officer, including cancellation orders.
  • Article 226, Constitution of India, 1950 — writ jurisdiction invoked given the non-functioning of the GST Appellate Tribunal in Uttar Pradesh.

Decision – In Favour of

The decision favours the Assessee on the procedural question, though it is not a final win on the underlying bogus-ITC allegation. The Court set aside both the cancellation order and the appellate dismissal for want of reasons and remitted the matter for a fresh, reasoned decision after hearing the parties, leaving the substantive dispute over the alleged bogus purchases from M/s Anant Enterprises to be decided afresh.

Related Case Laws

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

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: WRIT TAX No. 1180 of 2023
  • CNR: Not available
  • Coram: Justice Piyush Agrawal
  • Decision Date: 17 October 2023
  • Disposal Nature: Allowed; remitted to first appellate authority

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