Facts of the Case

The petitioner, Surendra Bahadur Singh, a proprietorship engaged in civil contractual works and registered under GST (GSTIN 09BAWPS0102G1ZL), was issued a show cause notice dated 03.11.2022 for non-filing of returns for a continuous period of six months, with registration suspended from that date. The petitioner claimed no knowledge of the notice due to the COVID-19 upsurge, and consequently no reply was filed. An order dated 07.01.2023 cancelled the registration; the cancellation order itself recorded a 'nil' demand and gave no reasons for the cancellation. The petitioner's subsequent appeal, filed with a delay condonation application citing illness, was dismissed by the Appellate Authority on 01.07.2023 as time barred, on the ground that Section 107 of the GST Act does not empower condonation beyond the prescribed period. The petitioner then approached the Allahabad High Court challenging both orders.

Issues Involved

  1. Whether the Appellate Authority was correct in holding that it had no power to condone the delay in filing the appeal under Section 107 of the GST Act.
  2. Whether the original cancellation order dated 07.01.2023, being silent on reasons, could independently be challenged in writ jurisdiction despite the appeal against it having failed on limitation.

Petitioner's Arguments

  • Counsel for the petitioner conceded that no fault could be found with the appellate order dismissing the appeal as time-barred, since the Appellate Authority genuinely lacks power to condone delay beyond the statutory period.
  • It was argued, however, that the cancellation order itself was passed without application of mind, disclosing no reasons, and was thus violative of Article 14 of the Constitution.
  • Reliance was placed on Whirlpool Corporation v. Registrar of Trademarks, (1998) 8 SCC 1, to submit that since the appeal was not decided on merits, the doctrine of merger did not apply and the original order remained independently open to challenge.
  • Reliance was also placed on this Court's decision in Om Prakash Mishra v. State of U.P., Writ Tax No.100 of 2022, that reasons are the heart and soul of any administrative or quasi-judicial order.

Respondent's Arguments

  • The State, represented by the Standing Counsel, supported the appellate order's finding that the appeal was rightly dismissed as barred by limitation, as Section 107 permits no further condonation.

Court Order / Findings

  • The Court examined the cancellation order dated 07.01.2023 and found that it disclosed no reasons whatsoever for cancelling the registration, despite the drastic civil consequence of shutting down a running business.
  • The Court held that a quasi-judicial order without reasons fails the test of Article 14 of the Constitution and cannot be sustained, regardless of the appeal against it having failed on limitation.
  • The cancellation order dated 07.01.2023 was accordingly set aside and the petition allowed.
  • 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 order after affording a hearing.
  • Liberty was reserved to the Department to proceed in accordance with law following the setting aside of the cancellation order.

Important Clarification

  • Even where a statutory appeal against a GST registration cancellation order fails on limitation and the Appellate Authority has no power to condone the delay, the underlying original order remains independently amenable to writ challenge if it is a non-speaking order.
  • A cancellation order that records no reasons for the drastic step of shutting down a taxpayer's registration violates Article 14 and cannot survive judicial scrutiny, irrespective of the fate of the statutory appeal.

Sections Involved

  • Section 29, Central Goods and Services Tax Act, 2017 – governs cancellation of registration, including for continuous non-filing of returns.
  • Section 107, Central Goods and Services Tax Act, 2017 – prescribes the limitation period for filing an appeal and the Appellate Authority's limited power to condone delay.
  • Article 14, Constitution of India – the constitutional touchstone applied to strike down the unreasoned cancellation order.

Decision – In Favour of

The decision is in favour of the Assessee: the cancellation order was quashed for want of reasons and the matter remanded for a reasoned fresh decision, even though the appellate dismissal on limitation grounds was itself upheld as legally correct.

Case Details

Court: High Court of Judicature at Allahabad, Lucknow Bench
Case No.: Writ Tax No. - 172 of 2023
Neutral Citation: 2023:AHC-LKO:56111-DB
Coram: Justice Vivek Chaudhary and Justice Manish Kumar
Date of Order: 23.08.2023

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