High Court Quashes Non-Speaking GST Cancellation Order Despite Time-Barred Appeal

This case is related to a person named M/s Suraj Kumar Upadhyay, who approached the Allahabad High Court because its GST registration was cancelled, and it believed this cancellation was unfair and without any proper and legal reasons. The company explained that it is a registered business involved in work contracts, retail, and wholesale trade, and it has a valid GST number.

The Income Tax Department issued a Show Cause Notice (SCN) to the company on April 06, 2022, asking the company why its GST registration number should not be cancelled. The company argued that, under Section 29(4) of the UP GST Act, the department did not give any proper opportunity to them to represent their side.

Later, on April 20, 2022, the Assistant Commissioner issued an order cancelling the GST registration of the firm. The company argued that this order, too, did not mention any clear reason for cancellation. Additionally, the cancellation order incorrectly mentioned that the company did not submit the reply to their notice, even though the company clearly submitted its reply on April 19, 2022 (which is one day before the order was passed). The company then filed an appeal before the Additional Commissioner. However, the authorities cancelled their appeal on the grounds of delay in filing.

The petitioner relied on several previous judgements of the High Court. All those judgments clearly concluded that if an order cancelling GST registration does not give valid reasons, and if it is passed without applying legal mind, then it violates the constitutional right to do business under Article 19 and also fails the test of fairness under Article 14 of the Constitution. Even if an appeal is dismissed due to delay, the original order can still be challenged if it is illegal or unreasonable.

The High Court carefully examined all the documents and discovered that the department was sent the reply by the company on April 19, 2022, but still claimed in its order that no reply was submitted. Meaning, the officer either ignored the reply or did not read it properly, resulting in a lack of application of mind. The appeal was cancelled only due to delay and not on the actual facts or legal points.

The court said that cancelling a GST registration is a serious topic, as it affects a person’s right to perform any business. Therefore, any decision related to the GST registration should be taken fairly and carefully, with proper reasons and listening to the side of the concerned person. Since this was not done in this case, the court said that the GST registration cancellation order was not valid under law.

As a conclusion, the High Court ruled in favour of the company and quashed the earlier orders issued by the Assistant Commissioner and the Appellate Authority. The court ordered the adjudicating officer to now issue a new SCN to the company, and this time it must clearly mention the reasons for which cancellation is being considered.

This fresh notice must be given within one week of receiving the court’s order. The company must file its reply within 15 days after receiving the new notice. Then the officer must give the company a proper hearing and pass a fresh, reasoned order within two weeks after receiving the reply.