GST Registration Cancellation Orders Without Valid Reasoning Violate Article 14

Technosun India Pvt. Ltd. Vs Union of India (Allahabad High Court)

In the case of Technosun India Pvt. Ltd. Vs Union of India, the Allahabad High Court dealt with the cancellation of GST registration for Technosun India on January 3, 2022, due to non-compliance with filing returns for six consecutive months. The petitioner, engaged in the solar equipment business, was unable to respond to the show cause notice issued on December 2, 2021, due to the unfortunate death of the petitioner’s mother from COVID-19. As a result, the GST authorities canceled the registration. The petitioner appealed the decision, but the appeal was dismissed on the grounds of limitation, with the appellate authority considering the starting point of the limitation as the date of the cancellation order.

The petitioner sought judicial review, arguing that the cancellation order was a non-speaking order and lacked the necessary reasoning, which could be scrutinized under Article 14 of the Constitution. The Allahabad High Court, following its previous judgment in M/S Chandrasen, Sarda Nagar (Writ Tax No. 147 of 2022), held that the order was issued without proper application of mind and was in violation of the principles of fairness and transparency. Therefore, the Court set aside the cancellation order and allowed the petitioner to submit a fresh response to the show cause notice. The GST authorities were directed to pass a new order after considering the petitioner’s reply, ensuring compliance with legal requirements.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Amendment application filed today in Court is taken on record.

2. The amendment application is being filed whereby an additional prayer has been made seeking quashing of the cancellation order dated 03.01.2022.

3. The amendment application is allowed.

4. Let necessary amendments be made in the body of the writ petition during the course of the day.

Order on Main Petition

5. The present petition has been filed challenging the order dated 03.01.2022 whereby the registration of the petitioner was cancelled in exercise of powers under Section 29 of the Central Goods and Services Tax Act as well as the order dated 02.08.2022 whereby the appeal preferred by the petitioner was dismissed.

6. The facts in brief are that the petitioner was registered with the GST Authorities and is involved in the business of installation and commissioning of solar rooftop system and other solar equipment. It is stated that on 02.12.2021, the petitioner was served with a show cause notice highlighting the fact that the petitioner has failed to furnish return for a continuous period of six months under Sections 39 of the CGST Act and was called upon to file a reply within 30 days.

7. It is stated that the petitioner could not reply the said show cause notice on account of death of his mother on 05.06.2021 due to COVID-19 which led to the passing of the order dated 03.01.2022 (Annexure-4). The entire order is being reproduced herein below:

“Reference Number: ZA0902200654020

Date: 13/02/2020 To

TECHNOSUN INDIA PRIVATE LIMITED
HOUSE NO.-21/22, CHANDAN NAGAR COLONY, MUBARAKPUR NEAR
IIM, LUCKNOW, Uttar Pradesh, 226013
GSTIN/UIN:09AAHCT7161R2ZE

Application Reference No. (ARN): AA091221005159L

Dated: 02/12/2021

Order for Cancellation of Registration

This has reference to your reply dated 02/01/2022 in response to the notice to show cause dated 02/12/2021 Whereas the undersigned has examined your reply and submissions made at the time of hearing, and is of the opinion that your registration is liable to be cancelled for following reason(s).

1. In absence of any reply of the notice, the registration is cancelled.

The effective date of cancellation of your registration is 03/01/2022. Determination of amount payable pursuant to cancellation:

Accordingly, the amount payable by you and the computation and basis thereof is as follows:

The amounts determined as being payable above are without prejudice to any amount that may be found to be payable you on submission of final return furnished by you.

You are required to pay the following amounts on or before failing which the amount will be recovered in accordance with the provisions of the Act and rules made thereunder.

Place: RANGE-I
Date: 03/01/2022

UJJWAL SRIVASTAVA
Superintendent
Lucknow Sector – 9”

8. The petitioner preferred an appeal against the said order along with the hard copy in this office on 22.07.2022 which was dismissed on the ground of limitation. The Appellate Authority held that the starting point of limitation of filing of an appeal would be the date of the order.

9. The Counsel for the petitioner argues that the appeal has been dismissed as being beyond limitation as such the doctrine of merger would not apply and the petitioner is fair entitled to seek judicial review of the order dated 03.01.2022 on the ground that the same is non speaking order. This Court while deciding Writ Tax No.147 of 2022 (M/S Chandrasen, Sarda Nagar, Lucknow vs Union of India and others) had held that the order of cancellation of registration or any other order passed either on administrative or on judicial side is without any reason and prima facie, without application of mind, the same does not stand the test of scrutiny under Article 14 of the Constitution of India.

10. Thus, following the said judgment rendered in the case of M/s Chandrasen (Supra), the writ petition deserves to be allowed.

11. Accordingly, the writ petition is allowed. The order dated 03.01.2022 is set aside and the petitioner is permitted to appear before the respondent along with the reply to show cause notice and the certified copy of this order within three weeks from today. In case, the petitioner appears along with the reply and the certified copy of this order, the respondent shall proceed to pass a fresh order in accordance with law.

12. This order has been passed in the presence of Sri Shiv P. Shukla, learned Counsel for the respondent no.1 and learned Standing Counsel.