2025 (5) TMI 1354 - HC - GST

Limitation for filing an appeal under Section 107 - No opportunity to file a reply of SCN or participate in the proceedings - Cancellation of the GST registration retrospectively violation of principles of natural justice - HELD THAT - Following the decision of this Court on similar facts in the Ms Blackmelonadvance Technology Company Pvt Ltd V. Commissioner Of State Goods And Services Tax Delhi Anr. 2025 (4) TMI 1511 - DELHI HIGH COURT Accordingly exercising writ jurisdiction under Article 226 of the Constitution of India the Petitioner s appeal is directed to be heard on merits subject to payment of Rs. 20, 000/- as costs with the Department of Trade Taxes Government of National Capital Territory of Delhi. The proof of costs shall be placed before the Appellate Authority and the appeal shall be restored to its original number. The appeal shall be heard by the Appellate Authority on merits in accordance with law. The petition is disposed of.

Summary

The core legal questions considered by the Court include: (1) Whether the limitation period prescribed under Section 107 of the Central Goods and Services Tax Act, 2017 (CGST Act) for filing an appeal against the cancellation of GST registration was correctly applied to dismiss the appeal as barred by limitation; (2) Whether the principles of natural justice were violated due to non-service of the Show Cause Notice (SCN) and related documents upon the Petitioner; (3) Whether retrospective cancellation of GST registration without opportunity of hearing is permissible; and (4) Whether the writ jurisdiction under Article 226 of the Constitution of India can be exercised to allow condonation of delay and to enable adjudication on merits despite the limitation bar.

Regarding the limitation period under Section 107 of the CGST Act, the Court noted that the statutory timeline for filing an appeal is three months from the date of communication of the order, extendable by one month. The Appellate Authority dismissed the Petitioner's appeal as time-barred since it was filed well beyond this period. The Court acknowledged this limitation framework as the relevant legal standard governing appeals against GST orders.

However, the Petitioner contended that the SCN and the documents forming the basis of the cancellation order were never served upon it, thereby depriving it of knowledge and opportunity to participate in the proceedings. This raised the issue of violation of natural justice principles, which require that a person be given notice and an opportunity to be heard before adverse orders are passed. The Court examined earlier precedents, including a recent judgment involving similar facts, where it was held that if the Petitioner did not have knowledge of the SCN and was thus denied an opportunity to file a reply or attend a hearing, the limitation period would not commence, and the appeal should be heard on merits.

The Court emphasized that the retrospective cancellation from 1st July 2017, without prior notice or hearing, compounded the injustice. Such retrospective effect without affording an opportunity to contest the allegations is contrary to the principles of fairness and natural justice. The Court found merit in the Petitioner's submission that non-service of the SCN and lack of participation in proceedings rendered the limitation bar inapplicable in the circumstances.

In applying the law to facts, the Court relied on its prior decision in a case where the Petitioner similarly lacked knowledge of the SCN and was not afforded a hearing. There, the Court exercised its writ jurisdiction under Article 226 to allow the appeal to be filed within 30 days despite delay, directing the Appellate Authority to decide the matter on merits. The Court reasoned that such exercise of discretion was necessary to prevent miscarriage of justice and uphold the rule of law, especially where the statutory limitation period had not effectively commenced due to non-communication of the order.

The Court also considered the competing argument that the Petitioner should have been vigilant and that the address on record was outdated. While noting this, the Court held that such factors do not override the fundamental requirement of service and opportunity to be heard. The Court underscored that the statutory limitation period begins only upon communication of the order to the concerned person.

Consequently, the Court exercised its writ jurisdiction to set aside the impugned order dismissing the appeal as barred by limitation and directed that the Petitioner's appeal be restored and heard on merits. The Petitioner was directed to pay costs of Rs. 20,000/- to the Department of Trade & Taxes, GNCTD, as a condition for such relief. The Court left the rights and contentions of both parties open for adjudication by the Appellate Authority.

Significant holdings of the Court include the following:

"Under Section 107 of the Act, the limitation prescribed for challenging an order is three months from the date on which the said decision or order is communicated to the concerned persons."

"Since the grounds for seeking permission to file the appeal against the order was that the Petitioner did not have knowledge of the SCN and the subsequent proceedings arising therefrom, this Court, while exercising jurisdiction under Article 226 of the Constitution of India is of the opinion that an opportunity ought to be afforded to the Petitioner to assail the order on merits."

"If the same is filed within 30 days it shall not be dismissed on the ground of being barred by limitation. The adjudication thereon shall take place on merits and in accordance with law."

The Court established the core principle that limitation for filing an appeal under Section 107 of the CGST Act commences only upon communication of the order to the aggrieved party, and non-service of the SCN and non-participation in proceedings can justify condonation of delay. The retrospective cancellation of GST registration without notice violates natural justice and warrants judicial intervention. The writ jurisdiction under Article 226 can be invoked to restore the appeal for merits adjudication despite limitation bars, subject to payment of costs.

In final determination, the Court set aside the order dismissing the appeal as barred by limitation, directed restoration of the appeal to its original number, and mandated hearing on merits by the Appellate Authority. The Petitioner was directed to appear before the Appellate Authority on a specified date and pay costs, while the substantive rights and contentions remain open for adjudication.