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Facts of the Case

M/s Umesh Bricks, through its proprietor Umesh Mahto, challenged an order dated 26.07.2021 cancelling its GST registration, passed in Form GST REG-19 by the Assessing Officer, before the Patna High Court. The petitioner's appeal against the cancellation, having been filed with delay, was also rejected. Since no GST Appellate Tribunal had been constituted for the State of Bihar, the petitioner had no further statutory remedy and approached the High Court directly, contending the cancellation order disclosed no reasons whatsoever.

Issues Involved

  1. Whether a cancellation order in Form GST REG-19 that fails to state any reasons, or even refer to the subject matter of the underlying show-cause notice, can be sustained.
  2. Whether the absence of a functioning GST Appellate Tribunal further militates in favour of the High Court examining the cancellation order on its own terms.

Petitioner's Arguments

  • The petitioner's counsel argued that the impugned order was a non-speaking order, disclosing no reason as to why the cancellation was ordered and not even referring to the subject matter of the notice.
  • Reliance was placed on the Division Bench's own precedent in Manoj Kumar Sah v. The State of Bihar, holding that a similarly non-speaking, cryptic cancellation order violated principles of natural justice given its civil and penal consequences.

Respondent's Arguments

  • The State's counsel submitted that the prescribed Form GST REG-19 had been duly adopted by the Assessing Officer in passing the cancellation order.

Court Order / Findings

  • Examining Form GST REG-19 under the Bihar GST Rules, 2017, the Court found it has a specific column where reasons must be assigned, but that the Assessing Officer appeared to labour under the mistaken belief that no reasons need be assigned where the assessee does not appear or file an objection.
  • Following its own Division Bench precedent in Manoj Kumar Sah, the Court held that a cancellation order visiting civil and penal consequences on the assessee, but disclosing no reasons and not decipherable as to why cancellation was ordered, violates principles of natural justice and must be quashed.
  • The cancellation order dated 26.07.2021 was set aside and reconsideration of the issue directed, with the Court also noting the availability of Notification No. 3 of 2023 permitting revocation applications up to 30.06.2023 upon filing returns and paying dues, interest, penalty and late fee.

Important Clarification

  • A GST registration cancellation order in Form GST REG-19 must assign reasons in the column expressly provided for that purpose; a belief that no reasons need be recorded where the assessee has not appeared or objected is legally untenable, since cancellation carries both civil and penal consequences.
  • Courts will quash such non-speaking cancellation orders even where the statutory appellate remedy (GST Appellate Tribunal) is not yet constituted, and will additionally flag any amnesty-type notification (such as Notification No. 3/2023) available to the assessee for revocation on compliance.

Sections Involved

  • Section 29, CGST/Bihar GST Act, 2017 – governs cancellation of registration.
  • Form GST REG-19, Bihar GST Rules, 2017 – the prescribed form for cancellation orders, requiring reasons to be recorded.
  • Notification No. 3/2023 (Central Tax) – provided a window up to 30.06.2023 for revocation of cancellation on compliance.

Decision – In Favour of

The decision is in favour of the assessee. The non-speaking cancellation order was set aside for want of reasons, and reconsideration of the cancellation was directed, with the Court also flagging the amnesty window under Notification No. 3/2023.

Case Details

Court: High Court of Judicature at Patna
Case No.: CWJC No. 6460/2023
CNR / Citation: Not available in judgment text
Coram: Hon'ble the Chief Justice K. Vinod Chandran and Hon'ble Mr. Justice Madhuresh Prasad
Date of Order: 09 May 2023

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