Order without stating reason of cancellation of GST registration is non-speaking

Amit Chandrakant Shah Vs State of Gujarat (Gujarat High Court)

Gujarat High Court held that order passed cancelling GST registration without mentioning the reason for said cancellation is non-speaking and cryptic in nature.

Facts- The petitioner is engaged in the business of Trading of Gold, Silver and Building Materials etc. and has been a registered dealer holding GSTIN Registration No. 24ANLPS0681F1ZW under the provisions of the Goods and Services Tax Act, 2017 with effect from 04.08.2017.

A notice was issued by the Assistant Commissioner asking the petitioner to show cause as to why the registration certificate issued in the name of the his firm be not cancelled. He replied to the same and thereafter, a non-speaking order has been received by him from the respondent no.2 intimating him that the GST Registration Number is cancelled.

Conclusion- In case of Aggarwal Dyeing and Printing Works vs. State of Gujarat and others the similar notice had been quashed and set aside by the Court. Since the notice did not contain the requisite details and the order also was a non-speaking and cryptic in nature, the reason for cancellation could not have been deciphered from the same.

Resultantly, following the Coordinate Bench’s decision in case of Aggarwal Dyeing, this writ application is being ALLOWED solely on the ground of violation of the principles of natural justice. The show cause notice impugned herein is quashed and set aside granting a liberty to the respondent no. 2 to issue a fresh show cause notice with particular reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicant and to pass appropriate speaking order on merit which shall be done physically as directed in the very decision.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. By way of present petition under Article 226 of the Constitution of India, the petitioner seeks to challenge the order dated 10.05.2022 passed by the Assistant

Commissioner, Ghatak-8, Ahmedabad by which he has ordered to cancel the GST number issued to the petitioner. The prayers sought for in this petition are as follows:-

“(a) To admit and allow this petition;

(b) To quash and set aside the non-speaking order dated 10.05.2022 issued by the respondent no.2 at Annexure-G and issue a writ of certiorari or a writ in nature of certiorari or any other direction by holding and declaring the same to be illegal, bad in law and not in accordance with Act, 2017;

(c) Pending admission, hearing and final disposal of this petition, be pleased to stay the implementation, operation and execution of the non­speaking order dated 10.05.2022 issued by the respondent no.2 at Annexure-G;

(d) Pass any such other and/or further orders that may be thought just and proper, in the facts and circumstances of the present case.”

2. The petitioner is engaged in the business of Trading of Gold, Silver and Building Materials etc. and has been a registered dealer holding GSTIN Registration No. 24ANLPS0681F1ZW under the provisions of the Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act of 2017) with effect from 04.08.2017.

2.1. On 01.10.2021, a notice was issued by the Assistant Commissioner asking the petitioner to show cause as to why the registration certificate issued in the name of the his firm be not cancelled. He gave a reply on 07.10.2021. The petitioner received a communication through e-mail on 14.10.2021 intimating that the order of dropping suo moto proceedings is cancelled.

2.2. Once again on 11.04.2022 a notice was issued by the Assistant Commissioner asking the petitioner to show cause as to why the registration certificate issued in the name of his firm be not cancelled. He replied to the same on 15.04.2022 and thereafter, a non-speaking order dated 10.05.2022 has been received by him from the respondent no.2 intimating him that the GST Registration Number is cancelled.

2.3. The petitioner also made a representation on 17.05.2022 against the order of cancellation of registration number where no heed was paid and therefore, the petitioner has approached this Court with the aforementioned prayers.

3. No reply is filed after this Court (Coram: Mr. N.V.Anjaria and Mr. Bhargav D. Karia, JJ.) issued the notice for final hearing on 29.06.2022.

4. Today, we have heard learned advocate Mr. Sandeep Limbani appearing for the petitioner and learned Assistant Government Pleader Mr. Trupesh Kathiriya appearing for the respondent – State and its authorities.

5. Learned advocate Mr. Snadeep Limbani has urged this Court having relied on the decision rendered in case of Aggarwal Dyeing and Printing Works vs. State of Gujarat and others [SCA 18860 of 2021 and allied matters, decided on 24.02.2022] that similar such notice had been quashed and set aside by the Court. Since the notice did not contain the requisite details and the order also was a non-speaking and cryptic in nature, the reason for cancellation could not have been deciphered from the same. He fairly submitted that while so doing, the Court had permitted the fresh notice with the particular reasons incorporating the details and to provide a reasonable opportunity.

6. Today Learned Assistant Government Pleader Mr. Kathiriya has produced a communication dated 22.09.2022 which says thus:-

“Sub.:- Undertaking for acceptance of Set assiding the order after giving opportunity of being heard to the taxpayer, i.e. Amit Chandrakant Shah whose GST number has been cancelled by our side.

Respected Sir,

With reference to above subject I would like to draw your kind attention that GST number 24ANLPS0681F1ZW, who has been registered in the name of the firm Amit Corporation and the owner/ Proprietor of the firm is Amit Chandrakant Shah. This GST number is Cancelled by our side on 11/04/2022. We have issued the Show cause notice to the tax payer but because of some technical glitches of BOWEB (GST) portal, we haven’t received the reply of the notice issued from GST Portal. I would like to declare that we will initiate fresh cancellation proceedings manually and will also issue fresh show cause notice to the dealer. After receiving the fresh reply from the dealer, if its found satisfactory, than we will restore the GST number of the dealer on the portal by informing the issue to GSTN Delhi. We will give them opportunity of being heard in manual format of notices.”

6.1. He also does not dispute that there are specific directions issued in case of Aggarwal Dyeing (supra) which had been also followed thereafter in yet another matter being Special Civil Application No. 7155 of 2022 on 11.04.2022. He also has brought to the notice of this Court another decision of this Court rendered in Special Civil Application No. 3596 of 2022 dated 24.02.2022 where while restoring the GST Registration Number of the writ applicant, the Court had remitted the matter back to the respondent authority for de novo proceedings.

6.2. He has shown his inability to make changes in the GST portal as that, according to him, is not in the hands of the GST authorities. It is for the Central Government to make the changes. For want of instructions as to whether there are any such initiatives made or not, there is nothing on the record which can indicate that aspect. However, he ensures to communicate it today itself to the highest authority and he hopes that thereafter there shall be no lapse in following the decision of this Court which has been passed in February, 2022.

6.3. He has urged the Court that the authority concerned has issued the show cause notice to the tax payer but some technical glitches in the portal had not allowed them to receive the reply of the notice from the GST portal and hence, they are declaring the initiation of fresh cancellation proceedings manually and will also issue a fresh show cause notice to the dealer. It is only after they find the fresh reply to the notice satisfactory, they will be restoring the GST Registration Number of the dealer on the portal by informing the issue to the GSTN Delhi.

7. Hearing thus both the sides, we noticed that this Court in case of Aggarwal Dyeing (supra) in a group of matters was dealing with the very issue, the show cause notices which had been issued by the respective Assistant / Deputy Commissioner under the Act was devoid of any specific details and particulars. The orders of cancellation of registration which were impugned before the Court were even more glaring which lacked even the basic details. Addressing this issue extensively, the Court had noticed that the respondent authority had failed to extend the sufficient opportunity of hearing before passing the order impugned despite of specific request for adjournment, the order was not only non-speaking but cryptic in nature and the reason for cancellation was not decipherable. On all counts, the respondent authority has failed to adhered to the legal position and therefore held that the basic principles of natural justice is violated and the order needed to be quashed.

7.1. While so holding, the Court also reflects that on inquiry made with the learned AGP appearing for the respondent authority as to why such vague show cause notice and vague final orders bereft of any material particulars were being passed, the reply was that on account of the technical glitches in the portal, the department is finding difficult to upload the show cause notice as well as the final order of cancellation of registration contenting all necessary details and information. The Court did not find this to be a valid ground nor a sustainable explanation for the purpose of issuing show cause notices and passing of the order finally cancelling the registration of the persons concerned therefore, it directed the department that till this technical glitches are corrected, the show cause notices to be issued shall be manual/physical containing all material particulars and information to enable the dealer to effectively respond to the same. The physical copy was directed to be issued and dispatched by RPAD and likewise the final order would need to be containing all necessary reasons and its communication would need to be through the RPAD with a further addition that any lapse in this regard would be viewed strictly. This was essentially because the Court was flooded with these matters.

7.2. With these details the following directions have been given:-

18. Our fnal conclusion are as under:

18.1. Until the Department is able to develop and upload an appropriate software in the portal which would enable the Department to feed all the necessary information and material particulars in the show cause notice as well as in the final order of cancellation of registration that may be passed, the authority concerned shall issue an appropriate show cause notice containing all the necessary details and information in a physical form and forward the same to the dealer by RPAD. In the same manner, when it comes to passing the final order, the same shall also be passed in a physical form containing all the necessary information and particulars and shall be forwarded to the dealer by RPAD.

18.2 Over a period of time, we have noticed in many matters that the impugned order cancelling the registration of a dealer travels beyond the scope of the show cause notice. Many times, the dealer is taken by surprise when he gets to read in the order that the authority has relied upon some inspection report or spot visit report etc. If the authority wants to rely upon any particular piece of evidence then it owes a duty to first bring it to the notice of the dealer so that if the dealer has anything to say in that regard, he may do so. Even if the authority wants to rely on any documentary evidence, the dealer should be first put to the notice of such documentary evidence and only thereafter, it may be looked into.

18.3 The aforesaid may appear to be very trivial issues but, it assumes importance in reducing the unnecessary litigation. Our concern is that on account of procedural lapses, the High Court should not be flooded with writ applications. The procedural aspects should be looked into by the authority concerned very scrupulously and deligently. Why unnecessarily give any dealer a chance to make a complaint before this Court when it could have been easily avoided by the department.”

8. We also noticed that in Special Civil Application No. 7155 of 2022, it was yet another writ application under Article 226 where this very issue had arisen and the Court on bare perusal of the content of show cause notice and the order impugned had found it to be vague, bereft of any material particular and a non-speaking order. Accordingly, it had been quashed and set aside by reviving the GST Registration.

8.1. In SCA 7155 of 2022 on 11.04.2022 a request was made on the part of the learned advocate for the petitioner when the very vagueness and cryptic order had been reflected the action of the respondent authority to initiate the notice for contempt. The Court also found justification in such a request of initiating the proceedings of the contempt of Court, however, it chose to restrain itself with the warning to the respondent no.2 in that matter and added that if the Court comes across such a vague order or show cause notice duly signed by the officer who had been impleaded in his personal capacity as the writ applicant, then that would be his last day in the office. Accordingly, the Court had ordered the cancellation of the registration of the writ applicant to be quashed and set aside and the order dated 05.04.2022 after setting it aside was further directed to restore the GSTN Registration of the writ applicant.

9. In the instant case, what is apparent is that for the first time, when the show cause notice was issued by Ghatak-8, Range-2 Division, Gujarat on 01.10.2021, the reply had been filed on 07.10.2021 and being satisfied with the same, a show cause notice was dropped. Thereafter once again, the show cause notice was issued on 11.04.2022 which had been replied to on 15.04.2022. What has been specifically pointed out to the authority concerned is there has been no reference to the provisions nor the rules nor any other details have been specified. Other requisite details since were missing, the attention was drawn of the concerned authority, however, the order of cancellation for registration number has been passed on 10.05.2022 by the Assistant Commissioner, Ghatak-8 which says thus:-

“Order for Cancellation of Registration

This has reference to your reply dated 22/04/2022 in response to the notice to show cause dated 11/04/2022 Whereas no reply to notice to show cause has been submitted;

The effective date of cancellation of your registration is 01/07/2017

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 02/05/2022 failing which the amount will be recovered in accordance with the provisions of the Act and rules made thereunder.

10. This is a complete non-application of mind as the order impugned has no reasonings at all. After referring to the reply dated 22.04.2022 and response to the show cause notice dated 11.04.2022, it says that no reply to the notice is submitted. The effective date of cancellation therefore has been made 01.07.2017 and he had determined the amount payable pursuant to the cancellation.

10.1. This, according to this Court, is in complete violation of the directions issued in case of Aggarwal Dyeing (supra) where the Court had been very categorical that unless the technical glitches are improvised, no such notice through the portal be issued. The Court had also expressed its concern that the Courts are flooded with various such matters and hence, for subsequent matters, it had issued the words of caution and also had given a warning to one of the officers whose such show cause notice and the cryptic orders had been noticed by the Court. The detailed guidelines which had been given to the authority concerned for making the changes in the portal also have not been paid any heed to.

11. We noticed that these notices issued to the present petitioner in the month of April, 2022 and thereafter also are subsequent to the decision of Aggarwal Dyeing (supra) and all those orders which had followed the Aggarwal Dyeing (supra) decision, there appears to be no initiative for making any changes in the portal. If at all any initiatives have been taken, there is nothing coming on the record for the Court to know as to whether those technical glitches are to be improvised or not. The very officer instead of realizing that this action on the part of the authority is contrary to the directions issued by this Court way back in the month of February, 2022, reiterates that because of some technical glitches of GST portal, the reply of the notice has not been received from the GST portal. Therefore, he declares that he would initiate the fresh cancellation proceedings manually and after it is found satisfactory on receiving the fresh reply, he would restore the GST number of the dealer. The least that was expected of the officer, on realizing that the initial notice on his part was contrary to the directions issued by this Court, was to express apology for repeating this very act and restoring the GST Number, straightway has sought permission of the Court to initiate a fresh action of cancellation. Assuming that this is an initiative out of his bona fide on realizing the mistake, the tenor of the communication does not reflect anywhere remorse of not following the decision. Assuming that it is not in the hands of the officer concerned to make any amendments and changes in the software or on the portal, the least they could have been done is to follow the directions once having realized the same from the averments of the petition.

12. We could notice that the Coordinate Bench of this Court had given a serious warning against one of the officers instead of referring the matter under the Contempt of Court Act. That ought to have been a sufficient wake up call for the department. Had that been followed, this petition would surely and absolutely could not have been needed in the first place. We also noticed that for present, though through this communication letter goes to terminate this proceedings, however, with further initiation of the show cause notice is going to be another round of litigation, this flood of litigation therefore would not stop unless there is awareness amongst the officers to comply with the directions and/or the department chooses to amend its portal.

13. Resultantly, following the Coordinate Bench’s decision in case of Aggarwal Dyeing (supra), this writ application is being ALLOWED solely on the ground of violation of the principles of natural justice. The show cause notice impugned herein is quashed and set aside granting a liberty to the respondent no. 2 to issue a fresh show cause notice with particular reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicant and to pass appropriate speaking order on merit which shall be done physically as directed in the very decision. With the aforesaid, the GST Registration Number of the applicant stands restored forthwith.

14. We had two options. One is to issue the show cause notice as to why the steps be not taken for initiating the contempt proceedings against the officer concerned, and secondly, to impose cost.

14.1. Learned AGP had urged this Court that if at all the show cause notice is manually issued, the entire proceedings shall be completed in time bound manner as provided under the statute. He further has added that he shall be intimating to the highest authority, the decision of Aggarwal Dyeing (supra) and subsequent decisions of this Court so that this repetition may not continue. He further has stated that in three weeks’ time, the procedure shall be completed.

14.2. Noticing the fact that the Courts have been giving directions after directions all these months and same had not been followed, let the guiding instructions to all the officers be issued in a week’s time from the receipt of copy of this order. Without fail, a copy of which shall be also sent to the Registrar (Judicial) by way of proof of compliance.

15. We choose not to initiate any action against the concerned officer since he has already uploaded the notice and the same along with accompanied documents have not been reflected on portal. However, after filing of the petition and having come to know of the limitation of the portal, the department could have immediately rectified its action and withdrawn the notice what it has chosen to do in the month of November. We deem it appropriate not to, therefore, saddle the officer concerned with the cost, however, this repetitive action surely will require imposition of cost which the department must bare. The cost is quantified to the sum of Rs.25,000/- (Rupees Twenty-Five Thousand) which shall be borne by the department to be paid to the petitioner herein.

15.1.We are also persuaded by the learned AGP that the kind of error which has been noticed in the present case is coming up for the first time and therefore, no cost should be imposed. The fact remains that the portal has not been amended till date and this matter has consumed substantive judicial time as the issue has dragged almost for six months and again with fresh notice, it is going to take a lot much time of all concerned only because of the technical glitches need to be amended at the end of the authority concerned.

16. Our attention is also drawn by learned AGP to the order of this Court in Aggarwal Dyeing (supra) particularly paragraph 7, where the learned Additional Solicitor General had ensured the department to resolve the issue within a short period. Let respondent No.1 take up with the GSTN at the earliest. GSTN not being the party before this Court, the direction of cost cannot be imposed upon any administrative officer of the GSTN and let the State work out that modality.