GST registration cancellation cannot stand where adequate opportunity of hearing was not provided.

The petitioner’s GST registration was cancelled suo motu by the second respondent on 10 March 2023 after he allegedly failed to file GST returns for six months and did not respond to the show-cause notice dated 15 January 2023 issued under Rule 22(1) read with Rule 21A(2A) of the CGST Rules, 2017.

The petitioner stated that he could not respond or attend the hearing because he was suffering from jaundice and internal fever and was undergoing treatment at Sanjeevani Emergency Hospital; he relied on a medical certificate dated 15 June 2023.

He further asserted that he had filed the relevant return on 15 April 2023 for the period preceding cancellation of registration.

His statutory appeal was dismissed on 18 September 2023 on the ground of limitation.

The petitioner consequently challenged the cancellation order and the appellate decision before the High Court.

1. Whether the cancellation of the petitioner’s GST registration was legally sustainable when the cancellation order was passed without granting a further effective opportunity of hearing after the petitioner failed to respond to the show-cause notice.

2. Whether the petitioner’s claim that he had filed the return on 15 April 2023, and his explanation for non-compliance, required consideration by the competent authority before deciding the cancellation of registration.

3. Whether the petitioner was entitled to relief despite the respondents’ objection that the statutory appeal was filed beyond the prescribed period of limitation.

The Court applied Rule 22(1) read with Rule 21A(2A) of the CGST Rules, 2017, which governs cancellation of GST registration for specified defaults, including non-filing of returns.

It also considered the statutory appellate limitation under Section 107 of the Central Goods and Services Tax Act, 2017, as relied upon by the Department.

The controlling procedural principle was natural justice: before taking an adverse administrative action, the affected person must receive a meaningful and adequate opportunity to submit a response and be heard, particularly where the authority proposes cancellation of registration.

The Court accepted that the petitioner had not responded to the show-cause notice or appeared at the initial hearing, but found that he had furnished an explanation based on illness and medical treatment.

Since only one notice had been issued and the cancellation order appeared to have been passed without fixing another date of hearing, the Court held that an adequate opportunity had not been provided.

The Court also rejected the Department’s interpretation that the petitioner’s statement regarding filing a return “for the period before the registration was cancelled” was inherently contradictory, holding that the statement required factual examination rather than summary rejection.

Although the Department relied on limitation to support dismissal of the appeal, the Court granted relief on the ground of denial of a proper opportunity in the original cancellation proceedings.

It directed the competent authority to verify whether the return had in fact been filed and to consider the petitioner’s compliance, including the possibility of permitting filing with applicable tax, penalty and fine if the return had not been filed.

The Court set aside the order dated 10 March 2023 cancelling the petitioner’s GST registration and directed the respondents to provide the petitioner an opportunity to file a response to the show-cause notice and to afford him a hearing before passing a fresh order.

The competent authority was further directed to examine the petitioner’s claim regarding the return allegedly filed on 15 April 2023 and, if necessary, consider permitting delayed filing subject to payment of applicable taxes, penalty and fine.

The entire exercise was required to be completed within three months from receipt or production of the judgment, with the petitioner directed to cooperate in the proceedings.