Facts of the Case

M/S Makewell Pharma, a Lucknow-based proprietorship engaged in civil contractual works and registered under the GST Act, was issued a show cause notice dated 09.11.2022 for failure to furnish returns for a continuous period of six months, with registration suspended from the same date. Due to the COVID-19 upsurge, the petitioner could not respond in time, and the Superintendent, Sector-20, Lucknow, passed the impugned cancellation order dated 23.12.2022 citing merely 'No Response,' without any further reasoning, effective from that date.

Issues Involved

  1. Whether a quasi-judicial cancellation order that discloses no reasons at all can be sustained under Article 14 of the Constitution.

Petitioner's Arguments

  • The cancellation order was passed without application of mind and disclosed no reasons, adversely affecting the petitioner's right to carry on business under Article 19.
  • As the appeal was dismissed only on limitation and not on merits, the doctrine of merger does not apply, and the unreasoned cancellation order remains open to challenge.
  • Reliance was placed on Whirlpool Corporation v. Registrar of Trademarks and this Court's own decision in Om Prakash Mishra v. State of U.P., holding reasons are the heart and soul of any administrative or quasi-judicial order.

Respondent's Arguments

  • The State's Standing Counsel did not dispute that the appellate authority could not condone the delay under the statutory scheme but otherwise defended the impugned action.

Court Order / Findings

  • The impugned order dated 23.12.2022 gave no reason whatsoever for the harsh action of cancelling registration.
  • A quasi-judicial order cancelling GST registration, which has an adverse effect on the fundamental right to carry on business, must disclose reasons; an order devoid of reasons fails the test of Article 14 of the Constitution and cannot stand.
  • The impugned order was 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 reasoned order after hearing the petitioner.
  • The Department remained at liberty to proceed in accordance with law.

Important Clarification

  • A GST registration cancellation order must record reasons; an order that merely states 'No Response' without engaging with the record fails to satisfy Article 14 and will be set aside irrespective of whether the assessee's statutory appeal against it was itself dismissed on limitation.

Sections Involved

  • Section 29, CGST Act, 2017 - cancellation of registration for failure to furnish returns for a continuous period.
  • Article 14, Constitution of India - right to equality, requiring non-arbitrary, reasoned administrative action.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the cancellation order set aside and the matter remitted for fresh, reasoned adjudication after hearing the petitioner.

Case Details

Court: Allahabad High Court, Lucknow Bench
Case No.: Writ Tax No. 207 of 2023 (Neutral Citation 2023:AHC-LKO:67482-DB)
Coram: Justice Vivek Chaudhary and Justice Manish Kumar
Date of Order: 16.10.2023

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