Facts of the Case

The Petitioner, M/s Samayshristi Enterprises, was engaged in the business of trading ferrous waste, scrap, and stainless steel and held a valid GST registration. Due to financial constraints, the Petitioner ceased business operations and applied for cancellation of GST registration with effect from 21.11.2023.

Subsequently, the Respondent issued a show cause notice dated 22.11.2023 seeking additional information, including:

  • Address for future correspondence, and
  • Reconciliation of GSTR-1, GSTR-3B, and GSTR-2A.

The Petitioner submitted a response to the notice. However, the Respondent rejected the cancellation application via order dated 03.01.2024, stating that the Petitioner neither attended the personal hearing nor submitted the required reply.

Issues Involved

  1. Whether an order rejecting a GST cancellation application without reasons is legally sustainable.
  2. Whether failure to provide a reasoned (speaking) order violates principles of natural justice.
  3. Whether cancellation under Section 29 of the CGST Act, 2017 can be denied without proper consideration of submissions.

Petitioner’s Arguments

  • The Petitioner had already ceased business operations due to financial difficulties.
  • A proper application for cancellation was filed along with compliance to the show cause notice.
  • The Respondent’s order was mechanical and non-speaking, lacking any reasoning or analysis.
  • The rejection was arbitrary and in violation of principles of natural justice.

Respondent’s Arguments

  • The Petitioner allegedly failed to attend the personal hearing.
  • The Petitioner did not submit the required reply to the queries raised.
  • Therefore, the application was rejected under Section 29 of the CGST Act, 2017.

Court’s Findings / Order

The Hon’ble Delhi High Court held:

  • The impugned order dated 03.01.2024 was bereft of reasons and merely contained a general statement without any supporting analysis.
  • Such an order does not qualify as a valid adjudicatory order.
  • A quasi-judicial authority is required to pass a reasoned (speaking) order.

Final Order:

  • The impugned order was set aside.
  • The Petitioner’s application for cancellation was allowed.
  • GST registration was directed to be cancelled w.e.f. 21.11.2023.
  • The Petitioner must comply with requirements under Section 29 CGST Act, 2017. 

Important Clarification by the Court

  • The Respondents are not precluded from initiating proceedings for:
    • Recovery of tax
    • Penalty
    • Interest

in accordance with law, even after cancellation of GST registration

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/SAS27022024CW29122024_114747.pdf

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