Court’s Decision
The Bombay High Court quashed the rejection of a revocation application filed by Gammon India under Section 30 of the Central Goods and Services Tax Act, 2017 (CGST Act) and directed the GST authorities to restore the company’s GST registration. The Court held that the order rejecting the revocation application was passed in violation of the principles of natural justice, particularly the right to be heard:
“It is well settled that orders affecting rights must not be passed without affording a reasonable opportunity of being heard. Even statutory timelines cannot override principles of natural justice where rights are seriously impacted.”
The Court directed the restoration of the petitioner’s GST registration and permitted the petitioner to file returns for the intervening period.
Facts
The petitioner, a well-known infrastructure and engineering company, was served with an order dated 14 June 2023 cancelling its Goods and Services Tax (GST) registration under Section 29 of the CGST Act for failure to file returns for six months. On 24 June 2023, the petitioner filed a revocation application under Section 30 of the Act, requesting the cancellation of the order.
The application was rejected by an order dated 27 July 2023, without affording the petitioner a hearing or stating any valid reasons. Aggrieved, the petitioner approached the Bombay High Court seeking relief, stating that the cancellation had severely impacted its business operations and the rejection of the revocation application was arbitrary and illegal.
Issues
- Whether the rejection of the revocation application without a hearing violates principles of natural justice.
- Whether the statutory provisions under the CGST Act mandate an opportunity to be heard before rejecting a revocation request.
- Whether the petitioner is entitled to restoration of GST registration and the right to file returns for the period in which the registration remained cancelled.
Petitioner’s Arguments
The petitioner contended that the impugned order rejecting its revocation application was passed without granting any hearing or issuing a show cause notice, thereby violating the fundamental principles of natural justice. It was submitted that the cancellation of GST registration had severely impacted the company’s ability to carry on business and issue invoices, leading to cascading legal and financial consequences.
It was further submitted that under Rule 23 of the CGST Rules and Section 30 of the CGST Act, the authorities are required to consider the reasons furnished and pass a speaking order after hearing the applicant. The petitioner argued that it had submitted a detailed explanation for the delay and provided proof of compliance, which was not considered.
Respondent’s Arguments
The GST Department defended the cancellation, arguing that the petitioner had defaulted in filing returns and that the rejection of revocation was as per statutory timelines. It was argued that since the petitioner had not complied with filing requirements, the rejection was valid.
However, the department was unable to point to any material on record that showed issuance of a show cause notice or grant of an opportunity to be heard before rejecting the revocation request. The department failed to demonstrate that the petitioner’s submissions were considered or responded to by the authorities.
Analysis of the Law
The Court analyzed Sections 29 and 30 of the CGST Act, which respectively provide for cancellation of registration and revocation of cancellation. Rule 23 of the CGST Rules requires that any revocation application must be disposed of after considering the explanation and compliance by the applicant.
The Court emphasized that where a statutory provision has the effect of curtailing a party’s rights to trade, business, or property, the principles of natural justice must be read into the procedure, regardless of whether the statute expressly requires a hearing.
Relying on settled law, the Court held that the impugned order was passed in breach of the audi alteram partem rule:
“An administrative or quasi-judicial decision that prejudicially affects rights must be preceded by due hearing. The GST registration is not merely a number—it is the right to do business.”
Precedent Analysis
The Court relied on the following judgments:
- M/s Aggarwal Dyeing and Printing Works v. State of Gujarat (2022 SCC OnLine Guj 570): Gujarat High Court held that even cancellation of GST registration requires compliance with natural justice, and rejection of revocation application without hearing is impermissible.
- Union of India v. Jesus Sales Corporation, (1996) 4 SCC 69: The Supreme Court emphasized the requirement of a show cause notice and hearing before passing orders affecting civil consequences.
These cases support the principle that the procedural safeguards of fairness, hearing, and reasoned order are implicit in tax adjudications under GST law.
Court’s Reasoning
The Bombay High Court found that no hearing was granted before rejecting the petitioner’s revocation application and no show cause notice was issued. The Court noted that the order was cryptic, lacked reasoning, and failed to consider the explanations given by the petitioner. The Court held:
“The rejection order is a non-speaking order and hence unsustainable. The record is silent on any attempt made to hear the petitioner. Such a decision cannot be permitted to stand.”
The Court further held that the mere failure to file returns cannot override the right to a hearing, especially when the petitioner had subsequently complied and shown bona fides.
Conclusion
The Bombay High Court allowed the writ petition and quashed the rejection order dated 27 July 2023. The Court restored the petitioner’s GST registration and permitted it to file returns for the cancelled period. The GST Department was directed to accept the returns and ensure that the petitioner is not treated as unregistered for the intervening period.
“The order rejecting revocation is quashed and set aside. The petitioner’s registration shall be restored forthwith.”
Implications
This ruling reinforces the inviolability of natural justice in the context of GST proceedings. The decision safeguards businesses against arbitrary denial of registration rights, and underscores the necessity of a hearing before any rejection that may impact trade and commerce. It establishes that even under a time-bound regime like GST, procedural fairness cannot be sacrificed.
Cases Referred and Their Relevance
- Aggarwal Dyeing and Printing Works v. State of Gujarat (2022): Applied to hold that rejection of revocation application without hearing violates natural justice.
- Union of India v. Jesus Sales Corporation (1996): Cited for the principle that civil consequences require procedural fairness including notice and hearing.
FAQs
1. Can GST registration be cancelled without issuing a hearing notice?
No. Even if the cancellation is for non-filing of returns, authorities must provide a reasonable opportunity to be heard before cancelling or rejecting revocation.
2. What recourse does a taxpayer have if a revocation application is rejected without reasons?
The taxpayer can challenge such rejection through a writ petition, as the Bombay High Court recognized that non-speaking orders violate natural justice.
3. Will restoration of GST registration allow the taxpayer to file returns for the cancelled period?
Yes. Once registration is restored by the Court, the taxpayer is permitted to file all pending returns to regularize compliance.
