2025 (7) TMI 779 - HC - GST

Cancellation of registration of petitioner - It is the grievance of the petitioner that sufficient opportunity of hearing was not given to the petitioner - violation of principles of natural justice - HELD THAT - From perusal of the documents attached with the petition it appears that a show cause notice for cancellation of registration was issued by the department on 07/10/2022 (Annexure P/2) in response to which reply was filed by the petitioner. Thereafter vide order dated 07/11/2022 (Annexure P/3) registration of petitioner s firm was cancelled. When appeal was preferred then appellate authority dismissed the appeal vide order dated 13/08/2024 (Annexure P/5) on the ground of delay. Therefore it is not a case where opportunity of hearing was not provided to the petitioner. It was very much provided but thereafter order was passed. However question is that the petitioner is facing adversity and wants to go again into the main stream of tax regime therefore it would be in the interest of department/revenue also to take the petitioner into regular main stream as part of formal economy so that he may conduct business while giving regular tax to the authority. The impugned orders dated 07/11/2022 (Annexure P/3) and 13/08/2024 (Annexure P/5) are hereby set aside and the petitioner is directed to submit all the pending GST returns specially for the period when the registration was cancelled and if such pending returns are submitted before the authority then authority shall consider the case for revocation of registration - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the cancellation of the petitioner's GST registration was validly effected in accordance with the procedural requirements under the Central Goods and Services Tax Act, 2017 and the associated Rules, particularly concerning the opportunity of hearing.
• Whether the appellate authority's rejection of the petitioner's appeal on the ground of delay was justified.
• Whether the petitioner, despite the default in submission of GST returns and consequent cancellation of registration, can be permitted to revive his registration by submitting pending returns and paying costs, in the interest of justice and the formal economy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Cancellation of GST Registration and Opportunity of Hearing

Relevant legal framework and precedents: The cancellation of GST registration is governed by Sections 25, 29, and 30 of the Central Goods and Services Tax Act, 2017, and Rules 21(a), 21(h), 22, and 23 of the Central Goods and Services Tax Rules, 2017. Section 29 provides for cancellation of registration on various grounds, including non-filing of returns. Rule 21 prescribes the procedure for cancellation, including issuance of show cause notice and opportunity of hearing.

Court's interpretation and reasoning: The Court noted that a show cause notice dated 07/10/2022 was issued to the petitioner, who responded to it. Subsequently, the registration was cancelled by order dated 07/11/2022. The respondents contended that sufficient opportunity of hearing was provided. The Court found that the procedural requirements were complied with, and the petitioner was given a chance to respond before cancellation.

Key evidence and findings: The petitioner's reply to the show cause notice and the issuance of the cancellation order after due process were key evidences. The petitioner's grievance that no hearing was given was negated by these facts.

Application of law to facts: Since the statutory procedure was followed, including issuance of show cause notice and consideration of reply, the cancellation order was validly passed.

Treatment of competing arguments: While the petitioner argued lack of opportunity, the Court found the procedural compliance persuasive. However, the Court also acknowledged the petitioner's adverse personal circumstances that led to non-filing of returns.

Conclusion: The cancellation order was valid and passed in accordance with law, with due opportunity of hearing.

Issue 2: Validity of Appellate Authority's Rejection of Appeal on Ground of Delay

Relevant legal framework and precedents: Appeals against cancellation orders are governed by the provisions under the CGST Act and Rules. The appellate authority can dismiss appeals if not filed within prescribed time limits unless condonation of delay is granted.

Court's interpretation and reasoning: The appellate authority rejected the petitioner's appeal dated 13/08/2024 on the ground of delay. The petitioner did not challenge the delay per se but sought relief on merits.

Key evidence and findings: The appellate order rejecting the appeal on delay was on record. No evidence was placed to show that condonation of delay was sought or refused.

Application of law to facts: The Court observed that the appeal was dismissed solely on procedural grounds without considering the merits. Given the petitioner's expressed willingness to comply and revive the registration, the Court found it appropriate to intervene.

Treatment of competing arguments: The respondents emphasized the procedural lapse and the availability of fresh registration. The petitioner sought a chance to regularize his affairs.

Conclusion: The appellate order was set aside to allow the petitioner an opportunity to regularize pending returns and seek revocation of cancellation.

Issue 3: Revocation of Cancellation and Reinstatement of Registration in Interest of Justice

Relevant legal framework and precedents: Section 30 of the CGST Act permits revocation of cancellation of registration subject to conditions. The Court has inherent powers under Article 226 to ensure justice and prevent hardship.

Court's interpretation and reasoning: Recognizing the petitioner's adverse family circumstances leading to default, the Court emphasized the public interest in bringing taxpayers back into the formal economy. The Court balanced the petitioner's default against the interest of revenue and justice.

Key evidence and findings: The petitioner's admission of default, willingness to pay costs, and submit pending returns were critical. The Court noted the absence of any mala fide or fraudulent conduct.

Application of law to facts: The Court directed the petitioner to submit all pending GST returns for the period of cancellation and pay a cost of Rs. 50,000 to the department. Upon compliance, the authority was directed to consider revocation of cancellation.

Treatment of competing arguments: The respondents argued for strict adherence to procedural rules and suggested fresh registration. The Court found that allowing revocation would serve the interests of justice and revenue better than forcing fresh registration.

Conclusion: The Court allowed revival of registration subject to compliance with pending returns and payment of costs, emphasizing the order's applicability to the peculiar facts of the case.

3. SIGNIFICANT HOLDINGS

The Court held:

"It is not a case where opportunity of hearing was not provided to the petitioner. It was very much provided but thereafter order was passed."

"The impugned orders dated 07/11/2022 and 13/08/2024 are hereby set aside and the petitioner is directed to submit all the pending GST returns specially for the period when the registration was cancelled and if such pending returns are submitted before the authority, then authority shall consider the case for revocation of registration."

"Since the petitioner committed default, therefore, he is liable to pay the cost of Rs. 50,000/- (Rupees Fifty Thousand), which shall be paid to the department alongwith the pending GST returns."

"It is made clear that this