Facts of the Case

M/s Jyoti Electricals, a sole proprietorship in Patna, was aggrieved by cancellation of its GST registration vide order dated 11.07.2022 (Annexure-2), against which an appeal was pending before the appellate authority. The petitioner contended that the cancellation order, issued in Form GST REG-19, was a non-speaking order that did not state any reason for cancellation and did not even refer to the subject matter of the underlying notice.

Issues Involved

  1. Whether a GST registration cancellation order in Form GST REG-19 that assigns no reasons can be sustained merely because the assessee did not appear or file an objection.

Petitioner's Arguments

  • The cancellation order was a non-speaking order that stated no reason for the cancellation whatsoever, in violation of principles of natural justice, notwithstanding that Form GST REG-19 under the Bihar GST Rules, 2017 has a specific column for reasons.

Respondent's Arguments

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

Court Order / Findings

  • On perusal of Form GST REG-19 and the Bihar GST Rules, the Court found the form has a specific column requiring reasons to be assigned, but the Assessing Officer appeared to labour under the mistaken belief that no reasons need be given where the assessee does not appear or file objections.
  • The obligation to assign reasons in a GST registration cancellation order under Form GST REG-19 does not disappear merely because the assessee failed to respond to the show cause notice; an order silent on reasons is non-speaking, cryptic and liable to be set aside, since it entails serious civil and penal consequences.
  • Relying on a coordinate Division Bench decision in Manoj Kumar Sah v. State of Bihar, which held that the authority ought to at least refer to the contents of the show cause notice and the response, the Court found the impugned order suffered from the same illegality and set it aside, directing reconsideration.
  • The Court also noted Notification No.3 of 2023, which allowed registered persons whose registration was cancelled for failure to file returns to apply for revocation up to 30.06.2023, subject to filing returns and paying dues.

Important Clarification

  • A GST registration cancellation order in Form GST REG-19 must record reasons referable to the show cause notice and any response received; the mere fact that the assessee did not respond does not excuse the authority from stating why cancellation was warranted, and a cryptic, non-speaking order will be set aside regardless.

Sections Involved

  • Section 29(2), CGST Act, 2017 - grounds for cancellation of registration, including failure to file returns.
  • Form GST REG-19, Bihar GST Rules, 2017 - prescribed form for order of cancellation, requiring reasons.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the cancellation order set aside and reconsideration directed.

Case Details

Court: High Court of Judicature at Patna
Case No.: Civil Writ Jurisdiction Case No.3070 of 2023
Coram: Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad
Date of Order: 25.04.2023

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