Facts of the Case

M/s. DNC Infrastructure Private Limited, represented by its Managing Director Mr. D. Naresh Chowdary, filed Writ Petition No. 31974 of 2023 before the High Court for the State of Telangana at Hyderabad, challenging the cancellation of its GST registration vide order dated 25.08.2023 passed by the Superintendent, Madhapur-IV-Circle, Hyderabad Rural GST Range. The cancellation order referenced a show-cause notice dated 02.07.2020 issued during the peak COVID-19 period for non-filing of returns for six continuous months. The petitioner had since filed all pending returns within the extended timelines announced by the Government of India, and had applied under Section 30 of the CGST Act, 2017 read with Rule 23 of the CGST Rules, 2017 for revocation, which remained undecided beyond the statutory one-month period. During the hearing, the Department shifted its stated ground, instructing counsel that cancellation was actually founded on an allegation of fraudulent input tax credit of about Rs. 31 crores, though the impugned order itself did not reflect this ground. The matter was decided on 11.12.2023 by Justice P. Sam Koshy and Justice N. Tukaramji.

Issues Involved

  1. Whether the cancellation order dated 25.08.2023, founded on a 2020 show-cause notice for non-filing of returns, could survive once the petitioner had filed all pending returns within the Government's extended timelines.
  2. Whether the Department could justify the cancellation on an entirely different, undisclosed ground (alleged fraudulent ITC of Rs. 31 crores) not reflected in the impugned order itself.
  3. Whether a fresh personal hearing notice issued after the cancellation order, by an authority senior to the one that passed it, was legally sustainable.

Petitioner's Arguments

  • The petitioner submitted that the show-cause notice dated 02.07.2020 only alleged non-filing of returns for six months during the COVID-19 lockdown, and that it had filed all returns within the Government's extended timelines, curing the default.
  • It was argued that the cancellation order, passed over three years later on 25.08.2023, was arbitrary and unreasoned, and did not deal with the fact that the default had already been cured.
  • The petitioner also contended that a subsequent personal hearing notice dated 05.12.2023, issued after the cancellation order and by a higher authority than the one that passed it, amounted to an impermissible post-decision hearing intended to coerce the petitioner.

Respondent's Arguments

  • The Department's Senior Standing Counsel, on instructions, submitted that the cancellation was in fact founded on an allegation that the petitioner had fraudulently availed input tax credit amounting to about Rs. 31 crores and passed it on further, though this ground did not appear in the impugned order.
  • No instructions were furnished regarding the propriety of the personal hearing notice dated 05.12.2023 issued after the cancellation order.

Court Order/Findings

  • The Court found that a plain reading of the impugned order showed it was passed solely with reference to the 2020 show-cause notice concerning non-filing of returns, and did not reflect the alleged fraudulent ITC availment at all.
  • The Court held that the impugned order was without any reason and could not be treated as a speaking order, particularly since the returns had been filed within the extended period and no further correspondence had occurred between 02.07.2020 and the cancellation on 25.08.2023.
  • The order of cancellation dated 25.08.2023 was set aside/quashed, and the respondent authorities were directed to forthwith restore the petitioner's GST registration; the Commissioner was asked to examine whether the post-cancellation personal hearing notice was warranted, and, if not, it would automatically lose efficacy.
  • The writ petition was allowed without costs, and pending miscellaneous petitions were closed.

Important Clarification

A GST registration cancellation order must be sustained on the grounds actually recorded in it — the Department cannot, at the hearing stage, justify cancellation by orally introducing a wholly different and more serious allegation (such as fraudulent ITC availment) that does not appear in the order itself. Where the recorded ground (non-filing of returns) stands cured by subsequent filing within an extended statutory timeline, and years have passed without further action, courts will treat the cancellation as unreasoned and unsustainable, and order restoration of registration.

Sections Involved

  • Section 29, Central Goods and Services Tax Act, 2017 – governs cancellation of GST registration, including for continuous non-filing of returns.
  • Section 30, Central Goods and Services Tax Act, 2017 read with Rule 23, CGST Rules, 2017 – provides the procedure and one-month timeline for the department to decide an application for revocation of cancellation.

Decision – In Favour of

The Telangana High Court allowed the writ petition and set aside the cancellation of GST registration, directing forthwith restoration, finding the impugned order unreasoned and unsustainable once the return-filing default had been cured. This is a clear decision in favour of the Assessee.

Related Case Laws

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

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No. 31974 of 2023
  • CNR: Not available on record
  • Coram: Justice P. Sam Koshy and Justice N. Tukaramji
  • Decision Date: 11 December 2023
  • Disposal Nature: Allowed (writ petition allowed)

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