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2025 (4) TMI 1579 - HC - GSTVoluntary cancellation of GST registration - principles of natural justice - HELD THAT - Since none of the material which is placed on record and which is alluded to was ever placed before the respondents the ends of justice would merit the petitioner being accorded an opportunity to place the same before the competent authority and for the same being examined afresh. Petition allowed by way of remand.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification for Cancellation of GST Registration on Grounds of Non-filing of Returns Relevant Legal Framework and Precedents: The GST regime mandates that registered persons must furnish returns as prescribed under Section 39(1) of the CGST Act, 2017. Failure to furnish returns for a continuous period of six months is a ground for cancellation of registration under Rule 22(3) of the CGST Rules. The petitioner was also required to file a final return in FORM GSTR-10 within three months of the cancellation order. Court's Interpretation and Reasoning: The Court noted that the respondents issued a Show Cause Notice (SCN) on 14 May 2024 citing the petitioner's failure to furnish returns for six continuous months as the basis for cancellation. However, the petitioner contended that all returns up to the date of its voluntary cancellation application (25 January 2023) had been duly submitted. The Court observed that the petitioner's failure to respond to the SCN was undisputed but emphasized that the material relied upon by the respondents to justify cancellation was not placed before them. Key Evidence and Findings: The record showed that the petitioner had applied for voluntary cancellation on 25 January 2023 and had been asked to furnish additional documents and pending returns, including reconciliation sheets. The petitioner did not comply with these requests, leading to rejection of the voluntary cancellation application on 19 April 2024. Subsequently, the SCN and the cancellation order dated 22 July 2024 were issued. Application of Law to Facts: The Court found that the cancellation was premised on non-filing of returns post the voluntary cancellation application date. However, since the petitioner claimed compliance up to that date and the respondents failed to consider the petitioner's submissions or evidence, the cancellation order was not sustainable in its present form. Treatment of Competing Arguments: The respondents argued that the petitioner's failure to respond to notices and furnish pending returns justified cancellation. The petitioner argued that returns up to the voluntary cancellation date were filed and that subsequent non-filing could not justify rejection of voluntary cancellation or cancellation of registration. The Court sided with the petitioner on the procedural and substantive grounds that the petitioner was not given an opportunity to place material before the authority. Conclusion: The Court concluded that the cancellation order could not stand without considering the petitioner's submissions and evidence, and that the petitioner should be afforded an opportunity to do so. Issue 2: Validity of Rejection of Voluntary Cancellation Application Relevant Legal Framework and Precedents: Voluntary cancellation of GST registration is governed by the provisions of the CGST Act and Rules, which require the registered person to furnish all pending returns and documents before cancellation is granted. The authority may reject such application if the conditions are not met. Court's Interpretation and Reasoning: The Court noted that the respondents had rejected the petitioner's voluntary cancellation application on 19 April 2024 due to failure to produce additional documents and pending returns including reconciliation sheets. The petitioner admitted failure to respond to the notice but claimed compliance with returns up to the application date. Key Evidence and Findings: The rejection was based on the petitioner's admitted non-compliance with the notice dated 25 January 2023. However, the Court found that the petitioner was not given an opportunity to explain or place relevant material before the authority after the rejection. Application of Law to Facts: The Court observed that the rejection of voluntary cancellation and subsequent cancellation order were linked. Since the petitioner was not given an opportunity to address the deficiencies, the rejection was procedurally flawed. Treatment of Competing Arguments: The respondents relied on procedural non-compliance by the petitioner, while the petitioner emphasized its compliance with returns and the need for an opportunity to be heard. The Court favored the principle of natural justice requiring an opportunity to be heard before adverse orders. Conclusion: The rejection of voluntary cancellation application was set aside, and the petitioner was to be allowed to submit necessary documents and returns for reconsideration. Issue 3: Entitlement to Opportunity to Place Material Before Competent Authority Relevant Legal Framework and Precedents: Principles of natural justice and statutory provisions under the GST Act require that before cancellation of registration, the registered person must be given an opportunity to respond to show cause notices and place relevant evidence. Court's Interpretation and Reasoning: The Court emphasized that none of the material relied upon by the respondents was placed before the petitioner, and the petitioner was not afforded a chance to submit evidence or explanations prior to cancellation. This was contrary to the principles of natural justice. Key Evidence and Findings: The petitioner's failure to respond to notices was noted, but the Court found that the petitioner should be given an opportunity to submit replies and supporting documents afresh. Application of Law to Facts: The Court held that the SCN proceedings must be revived and reconsidered after the petitioner submits a reply with supporting documentation, ensuring due verification of evidence. Treatment of Competing Arguments: The respondents' reliance on statutory provisions for cancellation was balanced against the petitioner's right to be heard. The Court prioritized procedural fairness. Conclusion: The writ petition was allowed, the cancellation order set aside, and the SCN proceedings revived for fresh consideration. Issue 4: Effect of Cancellation on Liability to Pay Tax and Other Dues Relevant Legal Framework and Precedents: Under the CGST Act, cancellation of registration does not absolve the registered person from liability to pay tax and other dues for any period prior to cancellation, whether determined before or after cancellation. Court's Interpretation and Reasoning: The cancellation order itself stated that cancellation does not affect the liability to pay tax or discharge obligations under the Act for periods prior to cancellation. Key Evidence and Findings: The Court reiterated this statutory principle as part of the order and noted that the petitioner's obligation to pay outstanding dues remains unaffected by cancellation. Application of Law to Facts: The petitioner was reminded to file all pending returns and discharge liabilities despite cancellation proceedings. Treatment of Competing Arguments: There was no dispute on this principle; it was a statutory mandate. Conclusion: Cancellation does not relieve the petitioner from prior liabilities under the GST Act. 3. SIGNIFICANT HOLDINGS "The cancellation of registration
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