Facts of the Case

The petitioner, M/s R.R. Projects, a proprietary concern represented by its proprietor, held GST registration No.36AAOFR4364C1Z3 under the Central Goods and Services Tax Act, 2017. The first respondent issued a show cause notice dated 17.11.2021 proposing cancellation of the petitioner's GST registration on the ground of non-filing of returns for a continuous period of six months. The petitioner submitted a reply on 27.11.2021, only two days after the notice, but the registration was nonetheless cancelled by order dated 29.11.2021 — just two days after that reply was filed. Strikingly, the impugned order itself recorded, in its own text, that the petitioner had submitted a reply, yet simultaneously stated, in the very same breath, that the registration was liable to be cancelled because the petitioner had not responded to the show cause notice, an internal inconsistency the petitioner placed squarely before the Court. The petitioner also explained, through a better affidavit filed pursuant to the Court's liberty dated 19.12.2022, the reasons for the delay in approaching the Court, which the Court accepted as satisfactory before examining the merits.

Issues Involved

  1. Whether a GST registration cancellation order that contains internally contradictory findings — acknowledging a reply was filed while also stating no reply was received — reflects non-application of mind and is liable to be set aside.
  2. Whether the petitioner is entitled to a fresh opportunity of hearing before a fresh order is passed.

Petitioner's Arguments

  • The petitioner assailed the legality and validity of the cancellation order, and separately explained the delay in approaching the Court by way of a better affidavit, which the Court found satisfactory.

Respondent's Arguments

  • The Standing Counsel for Commercial Taxes appeared and defended the proceedings, though the internal contradiction in the impugned order itself was not disputable on the face of the record.

Court Order / Findings

  • The Court found that the impugned order suffered from serious contradictions — on one hand recording that the petitioner had submitted a reply on 27.11.2021, and on the other stating that registration was cancelled because the petitioner had not responded — showing that the first respondent had not applied his mind and had mechanically passed the order.
  • The Court accepted the petitioner's explanation for the delay in filing the writ petition as satisfactory and entertained the case on merits.
  • The impugned order dated 29.11.2021 was set aside and the matter was remanded to the first respondent for a fresh order in accordance with law.
  • The petitioner was given 15 days to submit a fresh reply and, if necessary, file returns along with tax due, following which the respondent was directed to pass an appropriate order after affording due opportunity of hearing.

Important Clarification

A cancellation order that contains mutually contradictory findings — for instance, recording receipt of a reply while simultaneously proceeding on the basis that no reply was filed — demonstrates non-application of mind and is liable to be quashed on that ground alone, independent of the merits of the cancellation grounds themselves. Such internal contradictions are a useful, easily verifiable red flag for taxpayers reviewing any adverse GST order: where the order's own narrative of facts does not hold together, that inconsistency alone can found a challenge without needing to first establish the underlying merits.

Sections Involved

  • Section 29, CGST Act, 2017 — governs cancellation of GST registration, including cancellation for continuous non-filing of returns.
  • Rule 22, CGST Rules, 2017 — prescribes the procedure for cancellation of registration, including consideration of the taxpayer's reply to a show cause notice.

Decision – In Favour of

The decision is in favour of the Assessee. The cancellation order was quashed for non-application of mind, and the matter was remanded for a fresh, reasoned order after granting a proper hearing.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition No.45157 of 2022
Coram: Chief Justice Ujjal Bhuyan and Justice N. Tukaramji
Date of Order: 15.06.2023

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