High Court Quashes Cancellation of GST Registration, Directs Acceptance of Belated Returns

A sole proprietorship firm dealing in retail medicines and registered under GST since July 2017, faced cancellation of its GST registration for non-filing of returns for a continuous period. After a show-cause notice was issued through the GST portal on November 13, 2023, the GST Superintendent in Patna issued an ex parte cancellation of registration on December 15, 2023, without holding a personal hearing or issuing a reasoned order.

The petitioner challenged that the show cause notice was not served through any reliable mode of communication other than uploading on the portal. She was therefore unable to reply or appear on the appointed hearing date. Post this, she tried to file a revocation under Section 30 of the CGST Act, but the portal blocked her attempt because the registration had already been cancelled. Disappointed by the aforementioned cancellation order, the petitioner, citing a violation of natural justice, directly filed a writ petition under writ jurisdiction without exhausting the appellate remedy under Section 107 of the CGST Act.

Question Raised: Whether a GST registration cancellation order that is issued without providing a sufficient opportunity for hearings and without properly communicating the show cause notice violates natural justice principles and is liable to be quashed, even if the statutory remedy of appeal is not exhausted.

Court’s Decision: The Hon’ble Court held that merely uploading a show cause notice on the GST portal does not amount to sufficient compliance with the principles of natural justice, particularly when such action results in depriving a person of their fundamental right to carry on trade under Article 19(1)(g) of the Constitution. Several procedural lapses were noted, including the non-service of notice through registered mail or any other recognized mode, the notice being uploaded on November 13, 2023, and the date of hearing on December 11, 2023, being too close together, and the final cancellation order being a non-speaking order that did not address the case’s merits or the available records as the notice had initially stated.

The court relied on key precedents like Godrej Sara Lee Ltd. v. Excise and Taxation Officer & Ors., the Supreme Court held that writ jurisdiction can be invoked even when alternative remedies exist, especially where there is a violation of natural justice. In Kranti Kanti Associates Pvt. Ltd. v. Masood Ahmed Khan & Ors., the Apex Court had emphasised the need for recording reasons in quasi-judicial orders. Rohit Enterprises v. Commissioner & Ors. by Bombay High Court was also cited to reinforce the principle that cancellation of GST registration affects constitutional rights, and therefore, notices must be properly served. The court rejected the State’s reliance on Vishwanath Traders and earlier coordinate bench decisions, noting that those cases were factually distinguishable and did not involve such clear breaches of procedural safeguards. As a result, the Hon’ble Court invalidated the cancellation order dated 15.12.2023 as well as the show cause notice dated 13.11.2023. It instructed the authorities to accept the petitioner’s late returns and reinstate her GST registration. It was mandated that the procedure be finished within three months of the judgment being received.