Case Note & Summary
The petitioner, a proprietary concern engaged in aggregation and supply of used plastic PET bottles, held GST registration effective from 16 March 2023. In March 2024, its proprietor Mr. Ghosebasha was diagnosed with Stage V chronic kidney disease, leading to temporary discontinuance of business. In May 2024, respondent authorities conducted a field visit and found the business non-operational, initiating proceedings under Section 29 of the Central Goods and Services Tax Act, 2017 for cancellation of registration. A show cause notice dated 11 June 2024 was issued on the online portal under Rule 21(a) of the Central Goods and Services Tax Rules, 2017, alleging non-conduct of business from the declared premises and suspending registration. The petitioner filed detailed replies on 26 June 2024 and made representations explaining the proprietor's illness as the reason for the temporary shutdown, but by order dated 22 August 2024, the registration was cancelled without considering the submissions. The petitioner applied for revocation, but again a show cause notice dated 27 September 2024 was issued, and without awaiting a reply, an ex-parte order dated 10 October 2024 rejected the revocation. The petitioner challenged both orders under Article 226 of the Constitution, contending that they were arbitrary, passed in breach of natural justice, and without application of mind. The respondents defended the cancellation on the ground that no business activity was found at the registered premises. The High Court, comprising Justices G. S. Kulkarni and Aarti Sathe, found substance in the petitioner's contentions. It observed that the show cause notice lacked adequate reasons, the cancellation order did not discuss the petitioner's reply, and both the original and appellate orders were passed mechanically without consideration of the material on record. Relying on the coordinate bench decision in Makersburry India Pvt. Ltd. v. State of Maharashtra, the court held that such unreasoned and standardised orders violate natural justice and are without authority of law. Consequently, the impugned orders were quashed and the GST registration was directed to be restored from the date of cancellation, i.e., 16 March 2023.
Headnote
A) Goods and Services Tax – Cancellation of Registration – Requirement of Reasoned Order – Central Goods and Services Tax Act, 2017, Section 29; Central Goods and Services Tax Rules, 2017, Rule 21(a) – A show cause notice for cancellation of GST registration must set out specific grounds enabling the assessee to file an effective reply; a vague notice is defective and any consequential order of cancellation passed without dealing with the assessee's reply is arbitrary and liable to be quashed (Paras 7-9). B) Goods and Services Tax – Cancellation of Registration – Mechanical Exercise of Power – Central Goods and Services Tax Act, 2017, Section 29 – An order cancelling GST registration passed in a standardised manner without any discussion or reasoning violates principles of natural justice and is without authority of law; such order must be set aside (Paras 8-9). C) Goods and Services Tax – Restoration of Registration – Effect of Quashing Cancellation – Where an order cancelling GST registration is quashed due to arbitrariness, the registration stands restored from the date of cancellation as held in Makersburry India Pvt. Ltd. v. State of Maharashtra, 2023 (79) G.S.T.L. 341 (Bom) (Para 9).
Issue of Consideration
Whether the cancellation of GST registration and rejection of revocation application were arbitrary and in breach of natural justice due to failure to provide reasons in the show cause notice and non-consideration of the assessee's reply?
Final Decision
The Writ Petition is allowed. The impugned orders dated 22.08.2024 and 10.10.2024 are quashed and set aside. The GST registration of the petitioner bearing registration No. 27DWRPG8915E1Z4 is restored from the date of cancellation, i.e., 16.03.2023.
Law Points
- GST registration cancellation must be by reasoned order
- Show cause notice must specify adequate reasons
- Natural justice requires consideration of assessee's submissions
- Mechanical orders without application of mind are arbitrary
- Cancellation under Section 29 of CGST Act must follow principles of natural justice
- Restoration of GST registration upon quashing of invalid cancellation
- Rule 21(a) of CGST Rules does not dispense with duty to give reasons
