2025 (5) TMI 386 - HC - GST

Violation of principles of natural justice - ex-parte order - cancellation of registration of petitioner on the ground that previous quarters returns have not been filed by the petitioner - HELD THAT - On perusal of the record it shows that the show cause notice was given for failure of filing of returns for previous quarters. A copy of notice dated 6.9.2023 is annexed as Annexure No. 6 of this writ petition and on perusal of the same it shows that neither name of the proper officer has been mentioned nor its description has been mentioned. Once the notice does not disclose that before which officer the petitioner has to appear the notice cannot be said to be proper in accordance with law. Further the petitioner for the first time came to know about the cancellation in January 2024. Once the impugned cancellation order has been passed without putting any proper notice or affording any opportunity of hearing to the petitioner the same itself is in violation of principles of natural justice. Further the petitioner was also not afforded any opportunity of being personally heard. Therefore the impugned order cannot be sustained in the eyes of law. Conclusion - The record shows that the impugned order has been passed without application of mind and same does not satisfy the test of Article 14 of the Constitution of India. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the impugned orders of cancellation of GST registration passed without specifying the proper officer or providing adequate notice comply with the principles of natural justice.

- Whether the cancellation order, passed ex-parte without affording the petitioner an opportunity of hearing, violates the petitioner's fundamental rights under Article 19(1)(g) of the Constitution of India.

- Whether the appeal dismissal on the ground of limitation bars the petitioner from challenging the cancellation order on merits, particularly when no reasons were assigned in the original order.

- Whether the impugned orders satisfy the requirements of reasoned decision-making as mandated by Article 14 of the Constitution of India.

- The applicability of the doctrine of merger in the context of dismissal of appeal on limitation grounds when the original order is without reasons.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Show Cause Notice and Compliance with Principles of Natural Justice

Legal Framework and Precedents: The principles of natural justice require that a show cause notice must clearly specify the authority issuing it and the grounds for the proposed action, allowing the affected party an opportunity to respond. The GST procedural framework mandates issuance of a proper show cause notice before cancellation of registration.

Court's Interpretation and Reasoning: The Court observed that the show cause notice dated 6.9.2023 did not mention the name or designation of the proper officer before whom the petitioner was required to appear. This omission rendered the notice defective and non-compliant with legal requirements.

Key Evidence and Findings: Annexure No. 6 (the show cause notice) lacked identification of the issuing officer, which is fundamental for the petitioner to know the authority and respond effectively.

Application of Law to Facts: Since the notice was defective, the subsequent cancellation order passed ex-parte without affording the petitioner an opportunity to be heard violated the principles of natural justice.

Treatment of Competing Arguments: The State respondents supported the impugned order, but the Court emphasized the necessity of proper notice and hearing as a precondition for lawful cancellation.

Conclusion: The impugned cancellation order failed to meet the natural justice standards and was thus unsustainable.

Issue 2: Violation of Fundamental Rights under Article 19(1)(g)

Legal Framework and Precedents: Article 19(1)(g) guarantees the right to carry on any profession, trade, or business. Any restriction must be reasonable and comply with due process.

Court's Interpretation and Reasoning: The Court noted that the cancellation order adversely affected the petitioner's right to conduct business but was passed without application of mind or proper procedure, thus violating Article 19(1)(g).

Key Evidence and Findings: The absence of a proper notice and hearing, and the ex-parte nature of the cancellation, deprived the petitioner of the opportunity to defend its business interests.

Application of Law to Facts: The Court held that administrative action impacting fundamental rights must be reasoned and procedurally fair, which was lacking in this case.

Conclusion: The impugned orders violated the petitioner's fundamental rights under Article 19(1)(g).

Issue 3: Dismissal of Appeal on Grounds of Limitation and Doctrine of Merger

Legal Framework and Precedents: The GST law prescribes limitation periods for filing appeals. However, the doctrine of merger typically bars separate challenges once an appeal is decided on merits. The Apex Court in Whirlpool Corporation Vs. Registrar of Trade Marks held that orders devoid of reasons can be challenged despite dismissal of appeal on limitation grounds.

Court's Interpretation and Reasoning: The Court recognized that the appeal was dismissed solely on limitation grounds without adjudicating the merits. Since the original cancellation order did not assign any reasons, the doctrine of merger was held inapplicable.

Key Evidence and Findings: The appeal dismissal order dated 26.9.2024 was on limitation, and the original cancellation order dated 2.5.2023 lacked any reasoned explanation.

Application of Law to Facts: The Court relied on its own precedents, including M/s Surya Associates, to hold that absence of reasons in the original order permits challenge notwithstanding dismissal of appeal on limitation.

Treatment of Competing Arguments: The State argued that limitation barred the petitioner's challenge; the Court rejected this, emphasizing the need for reasoned orders.

Conclusion: The petitioner's challenge to the cancellation order is maintainable despite the appeal dismissal on limitation grounds.

Issue 4: Requirement of Reasoned Orders and Application of Article 14

Legal Framework and Precedents: Article 14 mandates equality before law and requires that administrative decisions be reasoned and based on application of mind. The Court's precedents stress that orders without reasons violate this constitutional mandate.

Court's Interpretation and Reasoning: The Court found that the impugned cancellation order was passed without any application of mind or assignment of reasons, failing the test of Article 14.

Key Evidence and Findings: The cancellation order dated 2.5.2023 was silent on reasons, and no opportunity was provided to the petitioner for hearing.

Application of Law to Facts: The Court held that such orders are arbitrary and cannot be sustained.

Conclusion: The impugned cancellation order violates Article 14 and is liable to be quashed.

3. SIGNIFICANT HOLDINGS

The Court held:

"Once the notice does not disclose that before which officer, the petitioner has to appear, the notice cannot be said to be proper in accordance with law."

"The impugned cancellation order has been passed without putting any proper notice or affording any opportunity of hearing to the petitioner, the same itself is in violation of principles of natural justice."

"The quasi judicial order which has an adverse effect on the right of the petitioner to run business as guaranteed under Article 19 of the Constitution of India, the same has been done without any application of mind which is neither the intent of the Act nor can it be held to be in compliance of the mandate of Article 14 of the Constitution of India."

"If no reason has been assigned for cancelling the registration, such order cannot sustain despite appeal being dismissed on the ground of laches, and the doctrine of merger will have no application."

"The impugned orders cannot sustain in the eyes of law and the same are hereby set aside."

"The matter is remanded to the adjudicating authority, who shall issue fresh notice to the petitioner mentioning the reason of the proposed cancellation of registration within a period of one week... The petitioner is directed to submit its reply within 21 days... and after submitting the reply... the adjudicating authority shall pass reasoned and speaking order... after affording due opportunity of hearing."

Core principles established include the necessity of proper and complete show cause notices identifying the issuing authority, the mandatory requirement of affording an opportunity of hearing before cancellation of GST registration, the constitutional mandate for reasoned orders complying with Articles 14 and 19(1)(g), and the non-applicability of the doctrine of merger where original orders lack reasons even if appeal is dismissed on limitation grounds.

Final determinations on each issue resulted in quashing the impugned cancellation orders and remanding the matter for fresh adjudication in compliance with procedural and constitutional mandates.