Facts of the Case

The petitioner, M/s Umesh Bricks, a proprietorship, was aggrieved by cancellation of its GST registration by order dated 26.07.2021, following which its delayed appeal was also rejected. Since no GST Appellate Tribunal has been constituted for the State of Bihar, the petitioner approached the High Court directly. Examining Annexure-2 (the cancellation order, in Form GST REG-19), the Bench found that it stated no reason whatsoever for the cancellation and did not even refer to the subject-matter of the underlying show-cause notice.

Issues Involved

  1. Whether an order cancelling GST registration in Form GST REG-19, passed without stating any reasons and without referring to the show-cause notice, could be sustained merely because the assessee failed to appear or file objections.

Petitioner's Arguments

  • The petitioner's counsel argued that the cancellation order was a non-speaking order, stating no reasons and not even identifying the subject-matter of the notice.

Respondent's Arguments

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

Court Order / Findings

  • The Court examined Form GST REG-19 under the Bihar Goods and Services Taxes Rules, 2017, and noted it contains a specific column where reasons for cancellation must be assigned — a requirement the Assessing Officer appeared to believe could be dispensed with where the assessee does not appear or file objections.
  • The Court held that it could not countenance an order stating absolutely no reason for cancellation, and relied on its own Division Bench ruling in Manoj Kumar Sah v. State of Bihar (C.W.J.C. No.18307 of 2022) that a non-speaking, cryptic cancellation order entailing civil and penal consequences 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.
  • The Court further noted Central Government Notification No.3 of 2023, allowing registered persons whose registration was cancelled for non-filing of returns under Section 29(2)(b)/(c) to apply for revocation up to 30.06.2023, subject to filing returns and paying tax, interest, penalty and late fee due.

Important Clarification

  • An order cancelling GST registration under Form GST REG-19 must record reasons in the column specifically provided for that purpose; an Assessing Officer cannot treat the assessee's non-appearance or failure to file objections as excusing the statutory obligation to state reasons, since cancellation carries both civil (loss of ability to do business) and penal consequences.
  • A cryptic, non-speaking cancellation order that does not even identify the subject-matter of the underlying notice is liable to be quashed as violative of natural justice, irrespective of the assessee's own default in responding.

Sections Involved

  • Form GST REG-19 under the Bihar GST Rules, 2017 - the prescribed form for orders cancelling GST registration, requiring reasons to be recorded.
  • Section 29(2)(b)/(c) of the CGST/Bihar GST Act, 2017 - grounds for cancellation, including continuous non-filing of returns, subject to the revocation window under Notification No.3 of 2023.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; the cancellation order was set aside for want of reasons and the matter remitted for reconsideration.

Case Details

High Court of Judicature at Patna, Civil Writ Jurisdiction Case No.6460 of 2023; Coram: Hon'ble The Chief Justice K. Vinod Chandran and Hon'ble Mr. Justice Madhuresh Prasad; decided on 9 May 2023.

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