Cancellation of GST Registration via Non-Speaking Order Violates Rule 22 and Principles of Natural Justice

The petitioner is a partnership firm registered under the Central Goods and Services Tax (CGST) Act, 2017

On 05.02.2024, the Proper Officer issued a Show Cause Notice (SCN) for cancellation of the petitioner's GST registration, citing a failure to furnish returns for a continuous period of six months

The petitioner failed to reply within the stipulated 30 days or appear for the personal hearing on 04.03.2024, citing financial distress and oversight

Consequently, the Proper Officer passed an order dated 08.03.2024 cancelling the registration with effect from the same date

The petitioner challenged this order via Article 226, contending it was non-speaking and arbitrary

1. Whether the impugned order dated 08.03.2024, cancelling the GST registration without assigning specific reasons, is legally sustainable under the CGST Act and Rules.

2. Whether the delay in filing the writ petition (over two years) precludes the court from granting relief against a statutory breach.

Section 29(2)(c) of the CGST Act, 2017, which empowers officers to cancel registration for non-filing of returns for a prescribed period

Rule 22(3) of the CGST Rules, 2017, which mandates that cancellation orders be issued in FORM GST REG-19

The principle of natural justice, holding that an adjudicating authority must record reasons for its decision to prevent arbitrary action and ensure conscious application of mind

Proviso to Rule 22(4), which allows the dropping of proceedings if the assessee pays all dues and files pending returns

The Court observed that the SCN dated 05.02.2024 was deficient as it failed to specify the precise months of default, thereby depriving the petitioner of an effective opportunity to respond

Upon examining the cancellation order dated 08.03.2024, the Court found it to be "non-speaking and cryptic," as the Proper Officer merely cited the statutory provision without assigned specific reasons for the conclusion

The Court reasoned that since FORM GST REG-19 explicitly requires the recording of reasons, a failure to do so is a violation of statutory prescriptions and the principles of natural justice

Regarding the two-year delay in filing the petition, the Court held that the "vulnerability of the order" due to statutory breaches outweighed the delay, as the cancellation carried severe adverse civil consequences for the petitioner’s business

It set aside and quashed the impugned order dated 08.03.2024. The court reverted the matter to the stage of the Show Cause Notice and granted the petitioner one month to either: (a) file a reply to the SCN, or (b) furnish all pending returns and pay tax dues, interest, and penalties as per the proviso to Rule 22(4). The Proper Officer was directed to provide outstanding due details if requested and conclude the proceedings via a speaking order within one month of the petitioner's response